Wood Sister predicts: Tesla's stock price will reach $2600 in 2029, with a market capitalization of $8.2 trillion USD

On the evening of the 12th Beijing time, ARK Invest, led by Cathie Wood, released the latest Tesla price target and research report, once again providing a long-term forecast for 2029. We have compiled Cathie Wood's annual Tesla stock price predictions for easy comparison. The last line is the latest forecast for this time.

Before the release of this research report, Elon Musk was already eagerly sitting in the front row with a small stool, looking forward to reading it as soon as possible:

"I really want to read this report. The more I think about robotaxis and humanoid robots, the more absurd the valuation becomes."

"They (referring to ARK) have always been the most accurate predictors of Tesla's value."

After the report was released, Elon commented: "Extremely challenging, but achievable."

Let's follow Elon and carefully read Cathie Wood's research report. The following is the full translation by Lao Wa. The authors of the report are Tasha Keeney, Sam Korus, Daniel Maguire.

Overview

ARK's updated open-source Tesla model predicts a per-share price of $2600 in 2029. As shown in the figure below, the optimistic and pessimistic Monte Carlo simulation results are the 75th percentile and the 25th percentile, with stock prices of approximately $3100 and $2000, respectively. This report introduces ARK's open-source Tesla model, which combines 45 independent input distributions to simulate a series of potential outcomes for Tesla and its stock.

ARK estimates that by 2029, nearly 90% of Tesla's market value and profits will be attributed to the robotaxi business, as shown in the following figure. At the same time, electric vehicles may only account for one-fourth of Tesla's total sales and 10% of Tesla's profit potential, as we believe that the profit margin of the robotaxi business will be much higher. The figure below breaks down revenue, EBITDA, and market value by business line.

Green: Electric Vehicles; Blue: Robotaxi; Dark Gray: Fixed Energy Storage; Black: Human-Driven Mobility Services; Gray: Insurance

This article is divided into four parts:

• Examples of Pessimistic and Optimistic Results
• Updates to ARK's 2023 Tesla Model
• Business Opportunities Not Included in the Model
• Risks and Limitations of Our Model

Examples of Pessimistic and Optimistic Results

We did not provide separate optimistic or pessimistic modeling, as we consider these two results to be the 75th and 25th percentiles of simulated results. However, the table below lists reasonable forecasts for both scenarios.

Examples of Pessimistic and Optimistic Results

\* Note: The similarity in total EBITDA margin and total gross margin between the "Pessimistic" and "Optimistic" examples reflects our most reasonable economic views for the two scenarios. In the pessimistic scenario, Tesla's scale is not as high, allowing it to maintain higher prices for a longer period, which benefits its profit structure. In the optimistic scenario, Tesla's electric vehicle business sees a decrease in gross margin and EBITDA margin as it sells to lower-priced car segments, but this is offset to some extent by the higher-profit proportion of the ride-hailing business.

Updates to ARK's 2023 Tesla Model

Updates to ARK's 2023 Tesla open-source model include

• Updates to assumptions on autonomous driving
• Updates to Tesla's production manufacturing growth rate
• Consideration in the 2029 model of some key drivers that are not the main focus of our price estimates

Updates to Assumptions on Autonomous Driving

We believe that Tesla will launch robotaxi services within the next two years, as shown in the figure below, with the likelihood of Tesla not launching robotaxi services within five years being very low.

ARK simulated the probability estimates of different years when Tesla first launched the robotaxi service.

Although the likelihood is small, if we exclude the possibility of a robotaxi network from the model, our target price would be around $350. It is worth noting that in the absence of a robotaxi launch, as we previously analyzed, Tesla may introduce human-driven travel services for strategic and tactical reasons.

From a modeling perspective, we previously estimated Tesla's revenue split to be around 40-60%, higher than Uber's around 20-30%. This year, we made some adjustments to the analysis, incorporating the following assumptions: Tesla will initially own and operate its vehicle network, retaining all revenue in the first one to three years. In the following years, we assume third-party companies will own and maintain the fleet, generating approximately $0.20 in service revenue per mile, with the remaining revenue per mile going to Tesla. In fact, in the final year of this model, Tesla's average split is around 80%. At the same time, we have revised the median expected launch year of the robotaxi service to the end of 2025.

While we have delayed the median expected launch date of Tesla's robotaxi service by a year, we still believe this service will be launched within the next five years. With the release of FSD v12, Tesla has transitioned to a neural network that learns from video data and directly controls vehicles, eliminating over 300,000 lines of manual code. By leveraging Tesla's vast data advantage (currently FSD has accumulated over 1.3 billion miles of driving), this update achieves human-like driving—zero intervention in some cases. According to our research, Tesla accumulates data at a rate 110 times faster than Waymo, as shown in the figure below.

Accumulation rate of driving miles, unit: million miles per year. Baidu vs Waymo vs Tesla vs Cruise

Furthermore, our research indicates that Tesla in FSD mode is about 5 times safer than human-driven Tesla and about 16 times safer than regular cars on the road, as shown in the figure below. With no longer constrained by AI training computing power, Tesla's accelerated software updates are improving performance and safety. Therefore, Tesla should be able to demonstrate that its robotaxi network has outstanding, statistically significant safety metrics and obtain regulatory approval.

The interval mileage of each collision accident only on city streets (unit: thousand miles). Tesla FSD mode (2023) vs Tesla manual driving mode (2022, ARK revision) vs Waymo (2023, company revision) vs US average (2022, ARK revision) vs Cruise (2023, company revision)

Tesla plans to release robotaxi-specific vehicles in August 2024. Although Tesla can retrofit its existing fleet into robotaxis, we believe that the customized CyberCab reflects Tesla's confidence in expanding its robotaxi business scale with its autonomous driving software. At the same time, the 30-day free trial of FSD in North America has increased Tesla's database, and it is rumored that Tesla will soon launch FSD in China. Finally, Tesla unveiled the effect diagram of the travel app in the latest financial report, indicating the release of this business model, and may first introduce human drivers to pave the way for robot drivers. We are increasingly confident in Tesla's ability to launch a robotaxi network in the next five years. Therefore, as each car becomes a cash flow generating machine driven by artificial intelligence, Tesla's business model should shift from one-time car sales to recurring revenue basis.

Updated Tesla's production manufacturing growth rate

In our price expectation example, 2024 is a year of flat to slight growth, and then from the end of 2029, car production will grow by 45% annually. After this year, we expect Tesla's scale expansion capability to depend on management bandwidth and Tesla's ability to open new factories. As production increases from the current 1.8 million vehicles per year to 6 to 16 million vehicles per year, the law of large numbers should lead to a lower growth rate. Robotaxis may mitigate the expansion of production scale by simplifying vehicle design and generate additional capital through the high cash flow generation capability of travel services. We also expect that most robotaxis will be sold to fleet owners rather than individuals, which could simplify the sales channels.

Considerations for some key drivers in the 2029 model that are not the main drivers of our price estimate

• Optimus

We believe that Optimus has minimal impact on our target price. Over the next decade, we expect Tesla to become a leading manufacturer and service provider of robots moving in physical space, as it will have the opportunity to leverage knowledge learned from robotaxis, self-developed inference chips, training power, and production scale. Tesla expects Optimus to complete useful factory tasks by the end of this year. Assuming Optimus can handle 10-20% of Tesla's work hours and its productivity is equal to or double that of human peers, by 2029, Optimus will save Tesla $3-4 billion, or 1-2% of production costs Our research indicates that humanoid robots represent a revenue opportunity of around $24 trillion globally, with approximately 50% in the manufacturing sector. If Tesla decides to sell Optimus externally, it could capture a significant share in this multi-trillion-dollar market, although meaningful commercial growth may occur after the five years covered by this model.

• Fixed Energy Storage

We estimate that Tesla's fixed energy storage growth rate will exceed that of cars, reaching around 850 gigawatt-hours of energy by 2029. However, if batteries become a limiting factor, Tesla may prioritize robotaxis for higher investment returns, as shown in the following figure.

Example of expected prices in 2029, EBIT per kilowatt-hour deployed, fixed energy storage vs electric vehicles vs electric vehicles for travel vs electric vehicles for robotaxis

Business Opportunities Not Included in the Model

• Tesla Semi

Tesla plans to commercialize the Semi in 2026. We believe that Tesla Semi will not make a significant contribution to Tesla's value within our five-year investment horizon.

• Supercharging Network

This year, with the support of partners such as Ford, General Motors, and BP, Tesla has solidified its technology as the North American charging standard. According to ARK's research, while supercharging stations are crucial for electric vehicles, they are unlikely to bring substantial revenue to Tesla. Even if the supercharging network continues to grow at its current pace, with utilization rates increasing from an average of about 11% to around 34% of gas stations, its financial impact on our target price compared to the scale of Tesla's robotaxi business is negligible.

• FSD Licensing

Tesla is currently discussing licensing its FSD software to an automaker. While this may be significant for Tesla, given the traditional automotive industry timeline from design to production, vehicles equipped with FSD from non-Tesla companies may not appear for several years.

Nevertheless, similar to over-the-air upgrades (OTA), automakers may experiment with FSD on some models, perhaps prioritizing electric drivetrains—recently lagging in their traditional vehicle production plans. Our research indicates that over the next five years, FSD licensing is unlikely to impact Tesla's revenue or profitability.

• Artificial Intelligence as a Service (AI-As-A-Service)

Tesla's plans to offer distributed artificial intelligence inference services (AI-inference-as-a-service, IaaS) and Dojo training services (training-as-a-service) may extend beyond our five-year investment horizon Although integrating distributed artificial intelligence reasoning services into personally owned vehicles may bring some challenges, such as unstable Wi-Fi connections and scheduling bottlenecks during parking, robotaxi fleets can solve some of these issues. Dedicated charging infrastructure and stable internet access, coupled with reliable vehicle scheduling, can form an organizational structure that supports artificial intelligence Infrastructure as a Service (IaaS) services.

While Tesla's management downplayed the work on Dojo during the first quarter earnings call in January 2024, Tesla has started producing the next generation Dojo chip this year, indicating progress in their work. Dojo may become a significant contributor to Tesla's internal computing power, but similar to last year, we do not expect Dojo's external use to make a meaningful contribution to Tesla's value in the next five years.

Risks and Limitations of Monte Carlo Model

ARK's 45 independent variables cover various scenarios we believe Tesla may encounter in the next five years. Unexpected events such as Elon Musk suddenly leaving the company, natural disasters, or pandemics could significantly impact these results.

Conclusion

In summary, ARK's target price for Tesla in 2029 is $2600 per share. Our pessimistic and optimistic scenarios suggest that Tesla's valuation in 2029 could range from $2000 to $3100 per share. We have published our simulation model on GitHub and invite readers to explore and test assumptions and/or create visual effects based on simulations.

Article Author: 瓦砾村夫， Source: 瓦砾村夫， Original Title: "Wood Sister Prediction: Tesla's Stock Price to Reach $2600 in 2029, Market Cap of $8.2 Trillion"