Last year, a group of the world's largest technology stocks delivered an average return of 112%, far outpacing the 24% return in the S&P 500 i🅘ndex. They were dubbed the⛄ "Magnificent Seven.'' The group includes:
- Nvidia
- Meta Platforms
- Apple
- Microsoft
- Alphabet
- Amazon
- Tesla (TSLA 0.49%)
Tesla is facing a very difficult year
Over the last few years, billion casino royal:Elon Musk has reiterated Tesla's goal to grow its EV deliveries by 50% annually 🎶for the foreseeable 🔴future. However, the company's record-high 1.8 million deliveries in 2023 represented growth of just 38%. For some perspective, Tesla slashed prices by over 25% throughout the year to spur demand, as consumers grappled with cost-of-living pressures.
There was a time when Tesla couldn't keep up with demand, but after building up to a production capacity of more than 2.3 million annual units, it appears consumers are shying away from EVs altogether. Legacy automakers like Ford Motor Company and General Motors have slashed billions of dollars in planned investments into th🍨eir EV businesses recently, citing soft demand🐠 and the ongoing price war.
Speaking of which, Tesla faces growing competition not only from those entrenched brands, but also from Chinese manufacturers like BYD, which can afford to sell vehicles for a fraction of the price due to lower production cost♉s. To stave off this threat, Tesla has revealed plans to start production on an affordable EV as soon as this year, and it could be priced as low as $25,000.
Cathie Wood's forecast accounts for more than just EV sales
Musk thinks Tesla should be viewed as an AI and robotics company, not a car company, because it's developing everything from autonomous software to humanoid robots. It recently launche💞d version 12 of its full self-driving (FSD) software, which allows Tesla vehicles to operate autonomously -- although it's still in beta mode, so human supervision is required.
The company intends to reveal a fully autonomous robotaxi called the Cybercab in August, and this long-awaited platform forms the basis of billion casino royal:Cathie Wood's $2,000 price target for Tesla stock. Musk plans to build an entire ride-hailing network at Tesla similar to Uber, except the Cybercab could operate around the clock, creating a new revenue st♈ream for Tesla with very high profit ma🍰rgins.
Existing Tesla customers with FSD-enabled vehicles can also monetize them when they're not in use by lending them to the ride-hailing network. Those customers pay a $99-per-month subscription fee for FSD, which could become a significantly profitable revenue stream for Tesla on its own, because software can be developed once and sold an unlimited number of times. The company is also considering licensing FSD software to other carmakers, which is yet another opportunity.Is Cathie Wood's $2,000 price target realistic?
Ark's financial models suggest Tesla will generate $1 trillion in annual revenue by 2027, which will value the company at $6.1 trillion (translating to $2,000 per share). Considering Tesla only generated $96.7 billion in revenue during 2023, it would have to grow by a whopping 80% every year between now and 2027 to meet Ark's forecast.Tesla's revenue actually fell by 9% year over year during the first quarter of 2024, which isn't a good start. But even Musk's previous 50% annual growth projection for EV delꦺiveries (which he abandoned) doesn't come close.
Ark believes 44% of Tesla's revenue will come from the robotaxi in 2027 -- in other words, the firm expects this brand-new platform to go from zero revenue today to potentially over $400 billion within the next four years. It sounds completely unrealistic, considering FSD software hasn't even cleared the necessary regulatory hurdles, so it isn't widely available yet.Tesla stock is currently trading 60% below its all-time high. The company's earnings per share shrank by 47% during Q1, driven by price cuts that are eating away at its billion casino royal:gross profit margin. If tha🦋t trend continues, upside i🍌n the stock will be limited in the short term.
Based on Tesla's trailing-12-month earnings of $2.73 and its current stock price of $162.13, it trades at a billion ca🎃sino royal:price-to-earnings (P/E) ratio of 59.4. That's twice as expensive as the 29.7 P/E ratio of the Nasdaq-100 technology index. That doesn't seem like a good value, given Tesla's top and bott𒀰om lines are shrinking at the moment.