Cathie Wood, renowned chief of Ark Invest, seems undeterred by recent market turbulence. She’s been on a shopping spree, purchasing well over $160 million worth of Tesla Inc. (NASDAQ: TSLA) shares in 2024. What’s the rationale behind this bullish move, and does it make sense for other investors to follow suit?
The Big Purchase
Ark Invest, under Wood’s stewardship, has been consistently increasing its stake in Tesla throughout the year. The flagship fund, the ARK Innovation ETF (NYSEMKT: ARKK), now holds approximately $640 million worth of Tesla stock, making it the fund’s second-largest holding, just behind Coinbase. This signals unwavering confidence in Tesla’s long-term prospects, despite recent setbacks in the electric vehicle industry.
The Bullish Case
Despite Tesla’s challenges, Ark Invest remains bullish on the company’s ability to overcome recent headwinds. The disappointing fourth-quarter earnings report and weak guidance have not deterred Wood’s team from believing in Elon Musk’s leadership and Tesla’s potential for future growth. The fund’s confidence in Tesla’s prospects is a resolute stance in an otherwise uncertain market landscape.
Wood’s Tesla Thesis and Valuation
Ark Invest’s outlook on Tesla is supported by a bold thesis that hinges on the company’s ability to perfect and monetize its full self-driving (FSD) software. Wood and her team have set a price target of $2,000 on Tesla, betting on the potential of FSD to revolutionize transportation and lead to substantial monetization. However, the stock’s relatively high price-to-earnings (P/E) multiple of 43 presents a daunting valuation, signaling that Tesla is not a stock for conservative investors or those seeking immediate returns.