Ark Invest predicts Tesla to hit $3,000 per share by 2025

Oppenheimer Analyst Colin Rusch joins Yahoo Finance Live to discuss the latest with Tesla as Ark Invest predicts the company will hit $3,000 per share by 2025.

Video Transcript

- Welcome back to Yahoo Finance Live. Tesla stock, on a rally right now. It's about 6% right now. It's currently sitting about $695.

Cathie Wood, Ark Invest management, said over the weekend that it expects Tesla's stock to hit $3,000 not long from now, by 2025. That's obviously up from where it's at right now. And at a $3,000 price point, the company would be worth almost $3 trillion.

So to get a pulse on that call and their own call, we have Colin Rusch. He's an analyst at Oppenheimer. And Colin, I understand you have an outperform on the stock, not as high as 3,000, but where do you see the trajectory for this company, which, by the way, has been a moving target over the past few months. It's a very volatile stock.

COLIN RUSCH: Yeah, obviously valuation is hotly contested right now on this stock and many stocks in the climate bucket. But what we're looking at is that the key element to the story for this next leg, as we see them really as a clear leader in EV technology, is really moving into the autonomous technology.

And the advantage they have is the number of cars that they have on the road. So if we look at the key benchmark being about six billion miles of testing to really validate autonomous vehicles, they've got about a million vehicles on the road and if you assume 10,000 to 12,000 miles per year on each of those vehicles, they can really go through that testing process and validate new technologies in that space every six months or so.

And as we move into a level 4, where you can really take your hands off the wheel pretty reliably on these vehicles, Tesla is really in a key position, from a data collection perspective, on trending their AI systems.

- But Colin, to that point about achieving autonomous driving, potentially within the next five years-- or at least that's really the projection that Ark Invest is hinging their bull case scenario on here, for Tesla-- analysts have really been speculating that Tesla could launch that robo taxi service for more than the past five years now. So what's different now, than over the past couple of years here? And is there a near-term path to actually deploying these services?

COLIN RUSCH: Yeah, so there's a couple of things that are really critical from our view-- one, the sophistication of the internal technology is continuing to evolve. The learning cycles are accelerating. As they have more cars on the road, they're able to collect more data. But the internal learnings, just in terms of their team and how they've approached this, has continued to evolve very quickly.

And so, a few years ago, they talked about driving across the country with a self-driving vehicle. That never happened. But I think what we're starting to see is real rollouts of actual functionality, where these cars are driving through urban areas without drivers really directing the vehicles.

That's a big deal in terms of the sophistication and the safety element of this, as they put that data in front of regulators. And as regulators get comfortable with this technology and they continue to accelerate their learning cycles, there's the real possibility that we're not waiting five years, but we're waiting more like two or three years for that sort of service to roll out.

And at that point, well, we can see a real structural change, in terms of valuation, because I think people will see this as disruptive for the entire auto industry and really seeing Tesla as the innovator that's well in front of their competitors.

- And Colin, one big story about the growth narrative for this company is the Chinese market. and we did see the news on Friday-- the stock blinked, but it did recover-- on Friday, that the Chinese government will restrict the use of Tesla vehicles by military staff and employees of some state-owned companies. Apparently, there's some government security concerns about the vehicle cameras maybe recording images in those cars.

Do you think that the China story is still as big as it was, let's say, a year or two ago, for Tesla? And if so, why not?

COLIN RUSCH: You know, I actually do think it's as big. And we actually wrote about the US-China dynamics around climate-related technologies this morning. It's an area where there's some serious common ground, but there's also a lot of contention.

And so to see Tesla see some restrictions within China borders is not a huge surprise, as everybody thinks about security concerns with these vehicles driving around. And I think that's an ongoing question for this technology in general, when you look at autonomous vehicles and the fact that these cars really can see out into the road to collect information and transmit that back to whoever owns the data.

As it pertains to Tesla's China strategy, it's been an element of deriving down costs through wrap up. And China, really being a leader in terms of the technology adoption, they really have been out in front of the other countries in the world. And it's a critical market, both from the supply chain but also a demand perspective.

And Tesla has brought some important technology into that market. They've been working with battery suppliers. They ramped up some very efficient manufacturing there.

As a key driver of profits, in our view, we would expect them to begin exporting some of those vehicles at some point in the not too distant future into other markets. And we think they already are into other Asian markets. But we might see that begin to happen into the Middle East and Europe out of the China market, just because the cost of production is so much lower.

And Colin, I'm wondering, too, just as-- for our Tesla investors, just thinking about the next catalyst here for this stock-- of course, there was no shortage last year, including the S&P 500, multiple consecutive quarters of profits. We had the ramp-up of the Shanghai gigafactory as well as the build-out underway for the Berlin gigafactory.

What do investors really have this year to grab hold of, if they're looking out at the next 12 months or so?

COLIN RUSCH: We've really thought that the counts are very similar-- over the last 10 years that we've covered the company, is really about production volumes and gross margin, and maintaining the prospect that this company is really transforming the transportation market.

And we think all three of those things are still very much in place. One, we're expecting very strong production numbers this year. And there doesn't seem to be an issue of sell through.

As they ramp up volumes, we should see those gross margins come down. We're going to see increased support at the policy level, both in Europe and the US here, likely by the end of the year.

And then it's about dreaming the dream of what this company could become. And we think as they roll out incremental functionality on the anonymous side, that dream becomes more palpable for investors. And that's why we remain very, very bullish on the stock at this point.

- All right. Well, we'll see where things take off in the next couple of months. Thank you, Colin Rusch, Oppenheimer analyst.