On Friday evening ARK Invest, the tech focused investment manager and ETF provider du jour, published its latest update to its Tesla model. The new 2025 price target? $3,000 per share, or a market capitalisation of just under $3tn. The bull case is a touch higher, of course, at $4,000 per share. The bear case is $1,500 per share, more than double where Tesla’s shares closed before the weekend.
Accompanying the blog post was an Excel sheet uploaded to GitHub, which you can download and toy with here. The “model”, as with the last iteration, has more logical holes than Blackburn, Lancashire (Editor - that’s a nod to one of the lyrics in the Beatles’ A Day in The Life right?). To be frank, it’s hard to know where to start, but here’s a few noticeable details from the bull case.
To start, ARK forecasts that Tesla’s almost non-existent insurance business could generate revenues of $6bn by 2025, with 40 per cent operating margins, more than three times the margins of auto insurance heavy weight Progressive.
Somehow, we are led to believe, it might manage to do this without having to meet the regulatory capital requirements that are de facto part of the business. In fact, ARK doesn’t even think the company will need to raise equity at all in the next five years, despite it modelling production of 10.6m cars in 2025 — almost 21 times 2020’s run rate. Then there’s the simple discrepancy that, for some reason, Tesla’s cost of debt in the bull case is 8 per cent, double the cost in its bear case. Oh, and ARK’s 2025 share count is plugged in at 964m, more than 100 million shares below Tesla’s current fully diluted share count of 1.08bn according to its latest 10-K. You might also spot ARK has Tesla’s working capital requirement remaining flat at $12.5bn over the next five years, even as it forecasts its electric vehicle revenues to grow from $26bn to $367bn. Did someone also forget to include a profit and loss statement, a balance sheet or a cash flow statement? And note, we haven’t even mentioned robo-taxis.
FT Alphaville could go on in more detail. But as with any gish gallop fully debunking ARK’s model would have taken a week of painstaking work and tens of thousands of words, which, by the time it had generated the news headlines it almost definitely knew it would (and has), would be utterly pointless. ARK’s target audience — the humble retail investor — probably wouldn’t have cared either way. So why bother?
To that point, the model seems to have done the trick. In pre-market trading, Tesla’s shares are up a touch over 4 per cent to $681.
So instead, perhaps it’s best just to sit back and enjoy the ARK spectacle as a sign of the times. Where arguably the most influential investment manager of the past five years seemingly feels comfortable publishing featherweight analysis on its largest position in the knowledge that, by and large, it’ll be swallowed hook, line and sinker by all and sundry.
What a world eh?
Related Links:
ARK Invest's effective Tesla model — FT Alphaville
The New Stock Influencers Have Huge - and Devoted - Followings — WSJ
"share" - Google News
March 22, 2021 at 08:21PM
https://ift.tt/38ZOZsX
ARK’s Tesla model gish gallops to $3,000 per share - Financial Times
"share" - Google News
https://ift.tt/2VXQsKd
https://ift.tt/3d2Wjnc
Bagikan Berita Ini
0 Response to "ARK’s Tesla model gish gallops to $3,000 per share - Financial Times"
Post a Comment