Even if full autonomy is not achieved and Tesla cannot produce an autonomous car, ARK estimates that the electric vehicle opportunity alone would boost its stock 2-6 fold from $195 today to $560-$1,200 by 2023. If Tesla does solve for full autonomy, however, and its electric vehicle (EV) production surpasses our bear case estimates, TSLA could scale significantly higher than their previous $4,000* price target during the next five years, thanks to our newly introduced bull case for electric vehicle volumes.
In ARKs original model, they forecasted that Tesla would sell roughly 1.7 million EVs in 2023. The key variable impacting our original bull and bear cases was not the number of EVs sold, but Tesla’s ability to launch an autonomous taxi network. During an ARK podcast, Elon Musk noted that Tesla could produce 3 million EVs in 2023. As a result, ARK have modeled a bull case for EV sales at 3 million units in 2023, which would be consistent with an exponential ramp in production.
The self-driving taxi service could be worth over $1.3 trillion in stock value by 2023.
ARK has pushed the launch of Tesla’s fully autonomous taxi network from 2020 in the model they published last year to 2021. Musk stated that Autopilot should be feature complete by the end of this year and that full autonomy would be commercially available sometime in 2020. Based on the assumption that 2020 is a stretch goal, like most of Elon Musk’s timelines, and on our analysis of the number of miles required to test and validate the Autopilot system, we now expect full autonomy to launch commercially in 2021. They estimate that regulators will require between 1 billion and 10 billion miles of data to prove that the system has a lower error rate than humans, and that Tesla will amass those miles in the 2-3 years after Autopilot is feature complete.
ARK is Not Worried About Tesla Demand
Tesla’s days sales of inventory outstanding (DSOs) were less than half of the US industry average in the first quarter, in the absence of advertising.
ARK expects $10-20 billion in equity dilution in addition to the $2.4 billion in net proceeds 15 that Tesla raised in May. Tesla had $2.2 billion in cash at the end of the first quarter which, thanks to the raise, now should total $4.6 billion. ARK estimates that Tesla should be free cash flow positive on balance for the remainder of the year. Debt repayment obligations for the year include a $165 million term loan due in June and $566 million in convertible senior notes due in November.