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Cathie Woods: Bold Prediction for Tesla

Recently the renowned stock picker and Tesla (TSLA) bull made a new price prediction on the automaker, which sounds just as crazy as the last time she made a wild prediction, but the first prediction has come true, and then some.

Cathie Woods is the Founder and lead stock picker for the Ark Invest family of exchange-traded funds. Woods initially started Ark Invest in 2014 and made heavy bets on technology companies.

She became a household name when her original $2,000 price target on Tesla, when the stock was trading for around $300 per share, came true on a split-adjusted basis.

When Cathie initially made her case for Tesla at $2,000, people thought she had lost her mind. They couldn’t understand how she arrived at that valuation and why she was so confident in that prediction.

Which, by the way, she was, considering she invested millions in Tesla before it went on its run higher.

Those investments in several different Ark Invest ETFs helped propel several Ark ETFs into the top ten best-performing ETFs for several years in a row.

Cathie is at it again, possibly giving investors a second chance to catch lightning in a bottle.

Cathie Woods Ark Invest owns a little more than $850 million worth of Tesla stock (stock price is currently around $170 per share). She believes the stock price can go to at least $1,400 per share by 2027.

That price is her bear case scenario, with a bull case scenario of $2,500 and a base case price of $2,000 per share. Those figures would represent an eight, eleven, and fourteen-fold return from today’s price.

Furthermore, the base-case price of $2,000 per share would give Tesla a market capitalization of $6.3 trillion. For context, two of the largest companies in the world Apple (AAPL) and Microsoft (MSFT), have market caps of $2.7 trillion and $2.2 billion. At $6.3 trillion, Tesla would be worth more than both of them combined.

Luckily, Cathie gave us a few reasons why she thinks Tesla can get to that price, with the main reason being a robotaxi business. Tesla wants to use its self-driving technology to operate a fully autonomous taxi business in the future. The idea is Uber (UBER), without the drivers.

Woods believes the bearish case for this business would make it worth $200 billion in 2027. Her bullish case for the robotaxi business is it will be worth $6143 billion by 2027.

While these figures seem insane since the division Woods is predicting will spur Tesla’s growth brings in nothing in revenue today, she has been right about Tesla and other technology companies in the past.

If you want to tag along on the Cathie Woods ride, the ARK Innovation ETF (ARKK) is her flagship ETF and has a sizable position in Tesla. The car company represents over 9.6% of the fund and is its top holding.

Tesla is also the number one holding, representing 12.7% of assets under management in Cathie Wood’s ARK Autonomous Technology & Robotics ETF (ARKQ). ARKQ has an expense ratio of 0.75%, the same as ARKK.

Another option is the ARK Next Generation Internet ETF (ARKW). ARKW has Tesla as its 6th largest holding, giving investors slightly less risk to the carmaker. ARKW has an expense ratio of 0.88%, making it a little more expensive than the other two, but still a good option for investors wanting exposure to Tesla and Cathie Wood’s investments.

All three funds are up year-to-date by a solid amount, 24.1%, 14.0%, and 29.7%, respectively. However, all three are also negative over the last year.

Cathie Wood’s has made big bets that have paid off and failed. Investors need to understand that her ETFs are not for everyone and carry a much higher risk/reward ratio than other options available.

However, if she is correct about Tesla’s longer-term future, anyone investing with her today will likely be pleased in the future.

Matt Thalman
INO.com Contributor
Follow me on Twitter @mthalman5513

Disclosure: This contributor did not hold a position in any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

This post was originally published on INO.com