4 reasons ARK recently increased its Tesla share price target to US$3,000

Cathy Wood's ARK Invest just raised its Tesla Inc (NASDAQ: TSLA) share price target to US$3,000. We run through the 4 main reasons why.

| More on:
A futuristic view of electric vehicle technology with speeding bright light trails indicating power.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The now infamous ARK Invest updated its Tesla Inc (NASDAQ: TSLA) share price target on Friday – it's now more bullish than ever.

Cathie Wood and her team of analysts last year estimated the US electric vehicle (EV) maker's shares would eclipse US$1,400 by 2024. But, with updated research, the disruptive-focused asset manager now estimates it could hit US$3,000 in 2025.

Although a year later, the upgraded price target represents a 114% increase on the firm's prior base case and an implied 358% upside from Tesla's current price.

There are four main reasons for the revised price target.

Less money, more production, higher Tesla share price

In ARK's 2025 Tesla share price target, the first reason listed for the target increase is refined capital efficiency. Originally ARK estimated that Tesla would spend US$11,000 to US$16,000 per unit of increased production capacity in 2024.

However, Tesla announced an anticipated 75% reduction in investment costs over time due to improved cell chemistry and manufacturing processes. Consequently, ARK has lowered its gross capital expenditure estimate per car.

For this reason, the asset manager now foresees sales somewhere between 5 to 10 million electric vehicles in 2025.

Take out a policy with Tesla

In August 2019, Tesla introduced its own vehicle insurance coverage for customers in California. These policies are provided through partnering with underwriters, but ARK believes Tesla could begin underwriting them itself in the next few years.

In addition to this, the margins on the policies are estimated to be better than average due to the detailed driving data available from the EVs.

ARK thinks the company could roll out the insurance offering to more states and acquire customers at a low cost, given Tesla's high safety profile and dynamic pricing ability. In this case, if Tesla sold 40% of its vehicles with its own insurance in 2025, insurance revenue alone could hit US$23 billion annually – and this is in ARK's bear case.

Did you request a Tesla for John?

Human-driven ride-hail is now incorporated into ARK's Tesla bear case share price. In the bear case, Tesla would deliver a ride-hailing service similar to that of Uber Technologies Inc (NSYE: UBER). However, Cathy Wood's team believes Tesla could do it with a lower cost structure.

If implemented, ride-hail could add US$20 billion to Tesla's operating profit by 2025, by ARK's estimates. This would also lay the groundwork for an autonomous service while providing a highly profitable recurring revenue stream.

Highest Tesla share price target = no human driver

Lastly, ARK's previous valuation model considered Tesla's chances of achieving fully autonomous driving before the end of 2024 to be 30%. The revised model has seen the team ambitiously raise the probability to 50% by 2025.

ARK estimates that if 60% of Elon's Autopilot-equipped EVs were to serve as robo-taxis', the company would generate an additional US$160 billion in earnings before interest, tax, depreciation, and amortisation (EBITDA) in 2025.

Furthermore, in ARK's targets, electric vehicle sales and robo-taxi business operations account for 40% and 50% of Tesla's estimated market capitalisation. Additionally, ARK estimates Tesla's combined operations to generate US$507 billion in revenue by 2025.

Should you invest $1,000 in Audinate Group Limited right now?

Before you buy Audinate Group Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Audinate Group Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Mitchell Lawler owns shares of Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Uber Technologies. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on International Stock News

An elderly man finds out he's made a mistake.
International Stock News

Warren Buffett's career in review: His worst investment decisions

Despite the wins, Buffett has also made plenty of errors in his long career.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
International Stock News

Warren Buffett's career in review: His best investment decisions

Buffett's best buys are simply astonishing.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
International Stock News

Meta Platforms is ramping up data center and AI investments. Is the growth stock a buy now?

Let's take a look.

Read more »

A head shot of legendary investor Warren Buffett speaking into a microphone at an event.
International Stock News

Berkshire Hathaway stock plunges after Warren Buffett steps down. Is this a golden opportunity to buy?

Investors might be wondering whether they should be buying or selling Berkshire Hathaway stock now.

Read more »

Man with virtual white circles on his eye and AI written on top, symbolising artificial intelligence.
International Stock News

Where Will Alphabet Be in 5 Years?

Today, the lowest-valued stock in the "Magnificent Seven" is Alphabet, and it's not close.

Read more »

Silhouette of CEO standing in conference room looking out at cityscape.
International Stock News

Who is Warren Buffett's successor Greg Abel?

Buffett's successor has been in training for years.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
International Stock News

Do Google's antitrust woes make Alphabet stock a buy, sell, or hold?

In the past year, Google lost two major antitrust cases aimed at the heart of its business.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
International Stock News

What did we learn from Warren Buffett at Berkshire's AGM over the weekend?

Buffett's final words of wisdom are well worth reading.

Read more »