Within a week, Tesla was sold twice. Is Mu Tou selling while promoting it?

At the beginning of June, after Tesla achieved 13 consecutive gains and its stock price soared, long-term bull Cathie Wood quietly sold Tesla stocks worth hundreds of millions of dollars.

On Friday local time, Wood's ETF ARK Innovation ETF disclosed that it had sold 62,415 shares of Tesla stock worth about $16 million. After this transaction was disclosed, several funds under Wood's name sold another 393,000 shares of Tesla stock, worth nearly $100 million.

In the past month, Tesla's stock price has rebounded nearly 50%, far outperforming the market, while the NASDAQ Composite Index fell 0.68% and the S&P 500 fell 0.37% during the same period. As Wood's largest holding, the rise in Tesla's stock price has also driven ARK Innovation ETF's return rate to over 15% in the past month.

Blowing while selling

Wood, who holds a large number of technology stocks, is one of Tesla's most staunch supporters. In 2022, when Tesla's stock price hit rock bottom, she spoke out for Tesla several times.

ARK's target price for Tesla is also very high. In April, after Tesla submitted an unremarkable quarterly report, ARK set a super high target price of $2,000 for Tesla to achieve by 2027, more than 10 times the average expectation of Wall Street analysts.

ARK's report shows that the institution believes that Tesla's future autonomous taxi business line will greatly drive the company's growth. By 2027, autonomous taxis are expected to contribute 58% of the expected enterprise value and 45% of the expected EBITDA (earnings before interest, taxes, depreciation, and amortization). According to ARK's model, Tesla's annual revenue will reach $1 trillion by 2027, of which $600 billion will come from car sales. Marginal revenue growth is much lower than that of autonomous taxis.

As of Friday's close, Tesla's stock price was $260. To achieve Wood's target price, it still needs to rise by 700%. On average, from now until 2027, Tesla needs to create a return rate of 66% every year.

Since she believes that Tesla's future is limitless, why did Wood reduce her holdings?

Possibly just to reduce volatility

Some market analysts pointed out that Wood's reduction of Tesla may only be to reduce volatility.

Tesla's stock currently accounts for more than 11% of ARK Innovation ETF's net asset value. According to Barron's, when a single stock holding accounts for more than 10% of the net asset value, Wood tends to reduce her holdings. Therefore, she may continue to sell some Tesla stocks in the future. ARK Innovation ETF has relatively concentrated holdings, with only 30 stocks in its portfolio, and the top ten holdings accounting for about 62% of the portfolio.

After all, Cathie Wood faced a sharp decline last year due to inaccurate timing. In 2022, ARK Disruptive Innovation ETF (ARKK) suffered a total loss of nearly 67%, becoming the ETF with the largest decline among more than 230 diversified ETFs in the US market, with a decline three times that of the S&P 500.

After experiencing such losses and being criticized by investors, it is expected that they will start to take measures to reduce volatility.