Tesla: Predictions for 2029 According to ARK
Expected Value of $2,600 per Share
According to the latest update of ARK’s open-source model, the expected value of Tesla shares in 2029 is $2,600 per share. This value was obtained through a Monte Carlo simulation that considered a series of potential outcomes based on 45 independent inputs. The simulations also identified bull and bear scenarios, with estimates of $3,100 and $2,000 per share, respectively. These represent the 75th and 25th percentiles of ARK’s forecasts.
Simulations and Methodology
ARK’s Monte Carlo model simulates one million possible scenarios to determine the potential outcomes for Tesla and its shares. The expected value of $2,600 is an average of all these simulations. The bull and bear cases reflect values in the 75th and 25th percentiles of the simulations, providing an idea of the best and worst possibilities for the company’s future. It is crucial to note that these predictions should not be interpreted as investment advice but as indications based on statistical analyses.
Outlook for 2029
According to ARK, 90% of Tesla’s company value and earnings in 2029 will be attributable to the robotaxi business. In comparison, electric vehicles will represent about 25% of total sales and contribute about 10% to the overall earnings potential. The projected margins for the robotaxi business are significantly higher than those for electric vehicles, reflecting greater profitability for this market segment.
Examples of Bear and Bull Outcomes
To better understand Tesla’s potential future trajectories, ARK provided examples of bear and bull outcomes for 2029:
- Vehicles sold: 5.8 million (bear) vs. 14.4 million (bull)
- Electric vehicle revenues: $250 billion (bear) vs. $394 billion (bull)
- Robotaxi revenues: $603 billion (bear) vs. $951 billion (bull)
- Total gross margin: 56% (bear) vs. 53% (bull)
- Market capitalization: $7 trillion (bear) vs. $10.9 trillion (bull)
- Share price: $2,000 (bear) vs. $3,100 (bull)
ARK’s Tesla Model Updates for 2023
ARK has implemented various updates to its open-source Tesla model to reflect new assumptions and projections:
- Updated autonomous driving assumptions: ARK expects Tesla to launch a robotaxi service within the next two years. If the robotaxi launch does not occur, the target share price would be around $350.
- Production growth rate: In the expected value case, Tesla’s vehicle production is projected to increase by 45% annually until 2029, scaling from 1.8 million units per year to 6-16 million units.
- Considerations for 2029: Besides robotaxis, the model also considers the potential contribution of Optimus (humanoid robot) and stationary energy storage, which could grow faster than vehicle production.
Robotaxi and Autonomous Driving
Tesla plans to launch a vehicle dedicated to robotaxis in August 2024. Tesla’s autonomous driving software, known as Full Self-Driving (FSD), has made significant progress, accumulating over 1.3 billion miles of autonomous driving. According to ARK, Tesla is gathering data at a rate 110 times higher than Waymo, another leader in autonomous driving. This significant data advantage should enable Tesla to demonstrate superior safety metrics and obtain regulatory approval for its robotaxi service launch.
Optimus and Stationary Energy Storage
Optimus, Tesla’s humanoid robot, is expected to have minimal impact on share prices in the short term but represents a significant future growth opportunity. Optimus could help reduce Tesla’s production costs by 1-2% by 2029. Regarding stationary energy storage, ARK estimates that growth in this sector will surpass that of vehicle production, with an energy capacity of 850 GWh by 2029. If batteries become a limiting factor, Tesla might prioritize robotaxis to maximize return on investment.
Other Business Opportunities
Tesla is exploring several other business opportunities, including:
- Tesla Semi: Expected by 2026, but with limited impact within the five-year investment horizon.
- Supercharger network: Essential for electric vehicles but with limited financial impact compared to robotaxis.
- FSD licenses: Tesla is in talks to license its FSD software to an automaker, but the financial impact is expected to be limited in the short term.
- AI-As-A-Service: Tesla is developing plans to offer distributed AI services, but these are expected to have a significant impact only in the long term.
Model Risks and Limitations
ARK’s Monte Carlo simulation model covers 45 independent variables and considers a wide range of plausible scenarios. However, unforeseen events such as Elon Musk’s departure or natural disasters could significantly alter the results. Additionally, the forecasts are based on assumptions reflecting ARK’s long-term positive bias towards Tesla, increasing the risks associated with relying on these estimates for investment decisions.
Conclusion
In conclusion, ARK Invest predicts an expected value of $2,600 for Tesla shares in 2029, with scenarios ranging from $2,000 (bear) to $3,100 (bull). The simulation model is available on GitHub for further exploration and hypothesis testing. It is crucial to consider these predictions as illustrative rather than investment advice, given the inherent uncertainty of long-term estimates.
