Ark Invest's thesis for Tesla (TSLA) -) — which has the stock trading at $2,000 a share by 2027 — is based largely on the firm's predicted value of the company's Full Self-Driving technology and the robotaxis that Ark thinks will follow.
Ark in October shrugged off Tesla's weaker-than-anticipated earnings, saying that the long-term thesis remains intact. Near-term issues with gross margins on electric vehicles aren't important to the thesis when Ark says that the robotaxi business will run with a gross margin of at least 50%.
Those wide potential margins, powered by Tesla's autonomy, are the basis for the firm's high expectations for Tesla's stock performance over the next four years.
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A number of analysts bullish on Tesla
Cathie Wood, the CEO of Ark, is not alone in this impression.
Wedbush Securities analyst Dan Ives is convinced that Tesla is a technology and artificial-intelligence play, rather than simply a car company.
He told TheStreet in August that Tesla's Full-Self-Driving technology positions the company as one of the "best AI plays when you look down the road three to five years."
Morgan Stanley analyst Adam Jonas, significantly boosting his Tesla price target in September, likewise said that the big value for Tesla is not in the cars it sells but in the software and services it could provide.
Jonas said at the time that Dojo, Tesla's customized supercomputer, could add more than $500 billion in value to the company through enhancements in robotaxis and other services.
Tesla has been using Dojo to train its AI models to improve self-driving efforts since July.
Full-Self-Driving remains a potential tech
Despite these bullish outlooks, all based to some degree on the capabilities of Tesla's Full-Self-Driving, the technology isn't there yet.
CEO Elon Musk has been saying for years that self-driving and robotaxis are right around the corner. Neither has yet to materialize. Tesla's current FSD technology, which drivers can buy as a software upgrade, requires drivers to keep hands on the wheel and full attention to the road, classifying the service at a Level Two.
A robotaxi would need to be at least a Level Four system, meaning it can drive itself without human intervention on specific routes. A Level Five system would drive itself better than a human in all scenarios, something several experts are skeptical could ever be achieved.
One expert told TheStreet in September that Tesla would need to adopt lidar — something Musk is unwilling to do — in order to jump to a Level Three designation.
Related: Here's the full story behind electric vehicle adoption
Shaky timeline for Tesla Full-Self-Driving
Musk, speaking last month at the annual DealBook summit, sounded a more cautious tone on the outlook for Full-Self-Driving.
"I've been optimistic about it. We've certainly made a lot of progress," Musk said. "The data is unequivocal that supervised full-self-driving is somewhere around four times safer than human driving by themselves. So I can see it coming."
Uncharacteristic for the billionaire, he did not provide bullish predictions or timelines on when Tesla might crack and then commercialize true FSD.
Musk previously said in July that Full-Self-Driving would be "better than human" by the end of this year.
And according to a Thursday report by Bloomberg, the head of Tesla's Dojo project, Ganesh Venkataramanan, is no longer with the company. Peter Bannon, a former Apple executive who has been with Tesla for seven years, succeeded him.
Tesla did not respond to a request for comment.
Black: Valuing TSLA+FSD is premature
The combination of the change in leadership at Dojo, in addition to Musk's less openly bullish perspective on the near-term capabilities of Full-Self-Driving — undefined timing and an emphasis on supervised FSD — reinforces Gary Black's perspective that "it is premature to include robotaxi in Tesla's valuation, despite bulls’ insistence that it be included."
Black, managing partner of Future Fund, has a $300 price target for the stock.
He still says that the release of Full-Self-Driving version 12 alpha in 2024, in addition to the possibility of an FSD licensing deal with other automakers next year, both represent strong catalysts for the stock.
Tesla shares, which have nearly doubled for the year, at last check were 1% lower above $229.
Contact Ian with tips via email, ian.krietzberg@thearenagroup.net, or Signal 732-804-1223.
Related: Tesla bulls and bears agree on one important point
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