Tesla’s shares jumped 19.89 percent to $780 at the close of early hours of February 4, Beijing time. It posted its biggest one-day gain since 2013, with a market capitalisation of more than $140 billion. Ark Investment, which on Saturday released an update to Tesla’s valuation model, now expects its shares to be worth $7,000 by 2024.
In a bull market, Tesla’s share price will reach more than $15,000, Mr Ark added. In a bear market, the company’s shares will be priced at $1,500, still about 2.5 times the current trading level.
The Ark Investment investment team considers three main variables when analyzing Tesla’s business model: gross margin, capital efficiency and autonomous driving. The company said it was bullish on Tesla’s ability to cut costs and increase profits, setting a 40 per cent profit margin probability of 80 per cent.
Analysts are least confident about the adoption of self-driving technology, saying Tesla has a 70 percent chance of making a fully self-driving car.
The team is divided on capital efficiency or the cost of making a car, saying Tesla has the ability to build a plant for $11,000 a unit, or as much as $16,000. The average price in the gasoline-powered automotive industry is currently $14,000.
“Electric cars will fall below the price of petrol cars over the next 18 months to two years and then continue to fall,” said Catherine Wood, chief executive of Ark Investment. This will be obvious. Electric cars will become cheaper and better cars. “
Over the next five years, Ark investment expects electric vehicles to account for a third of all car sales, with Tesla’s share at 18 percent.