ARK Invest Director of Investment Analysis & Institutional Strategies Tasha Keeney joins Yahoo Finance Live to discuss Tesla’s capital spending plan, price cuts, demand issues, fully-autonomous driving, and the outlook for the EV maker.
Video Transcript
- All right, Tasha, let's talk about this very, very bullish call. $2,000 a share by 2027. You're raising your price target when a number of analysts on the Street slashed their price targets because they were worried about margin pressure. What are they missing?
TASHA KEENEY: Well, I think the concerns for margin pressure are very short-term-oriented. We've heard Tesla say this, but we've actually modeled the opportunity in robotaxis and autonomy. And if you look at the future of Tesla vehicles that are capable, becoming robotaxi-enabled, earning a recurring revenue stream at what we think will be software-as-a-service-like margins, this is an amazing potential for Tesla. It'll definitely be the highest return on investment per battery produced as we've analyzed in our new report up on our website.
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So I think that, again, this will totally change Tesla's margin structure in the future. They mentioned on the earnings call that they're prioritizing getting cars out on the road. I think that's a smart decision as opposed to keeping margins high and prices high in the short-term. They just want to get as many cars out on the road as possible. Those cars feed Tesla's data engine . And that's what turns each of them into a fully autonomous car in the future.
- Yeah, Elon said on the earnings call he thinks they could achieve fully autonomous this year. Is that your expectation?
TASHA KEENEY: So we have a Monte Carlo model with a range of assumptions. The midpoint of our expectation is in 2024. So it'd be later than Elon says. In our most bullish case, I think they could launch fourth quarter this year. But again, the real thing to look at here is whether or not it's fourth quarter, whether or not it's next year, or the year after that, this is an amazing opportunity. We think the market for robotaxis globally could be worth $9 to $10 trillion in the next decade.
So it's clear why Tesla is pursuing this opportunity. And again with their data advantage and their vertical innovation, they really could be a leader here.
- So Tasha, that's a little bit down the line. When we talk about maybe the next year or two with Tesla, of course when they continuously cut the prices of vehicles, a lot of people are asking if there's a demand issue. Are you seeing any sign of that?
TASHA KEENEY: So again, the story here if you take a step back is really that EVs are gaining share. So Tesla was harping on their earnings call recently that you should think of them as a share of the total global auto market as opposed to just the EV sector. Because again, in the future it's going to be electric vehicles.
So my partner analyst, Dan, of course, has done a lot of great work looking at the electric vehicle market. We think that they'll be 60 million units sold in the next five years annually. And that's up from single digit percentage points as a percentage of auto sales today. So I think that Tesla here is really in the lead. They have a multi-year advantage over competitors.
It's, again, that vertical integration strategy that keeps them in the lead. So we think on an efficiency basis per cost for the price that you're paying for the car, they're still way ahead of the competition. And I'd be pretty scared if I were a traditional automaker right now and I saw Tesla cutting prices, I'll tell you that, because not all of these platforms are profitable at other automakers yet.
- Yeah, there's some very slim margins to those traditional automakers. So there are the margin concerns. There's also this group of shareholders that own a combined $1.5 billion in shares. They're concerned about something else. Now, there's a distracted CEO, of course, Elon Musk.
They write in this letter to the board, "We have grown increasingly concerned with governance and leadership issues at the company. Tesla needs a board that will ensure that the CEO is focused on addressing its challenges." Are you concerned about Elon Musk being distracted with Twitter, Space X, and everything else he takes on?
TASHA KEENEY: Well, it's not a surprise to us to see him tackling many issues at once. As you mentioned, Space X, he was one of the founders of OpenAI. We've seen him spread out his responsibilities among his companies. And really, what do we have to go off of? It's his execution.
Look at Tesla's progress today from five years ago. Again, it's the leading company in electric vehicles. We also think so in autonomy. And I think he's a really crucial figure to actually crossing that finish line to creating a fully autonomous car. So we have full confidence in him as the leader of Tesla. And in fact, we'd be more worried if he were stepping away from his responsibilities.
So I think that while, yes, it's shocking that he's able to manage this many companies at once, this isn't something that we haven't seen him do before.
- You're happy if he stays on board as CEO of Twitter beyond this year?
TASHA KEENEY: Yeah, so we are invested in Twitter in our private fund here at ARK. So I think that a lot of the ideas that he's put forward there have the potential to really change the company. Particularly the payments platform aspect of things we're pretty excited about. And our Fintech team has done a lot of research there.
But again, I think going back to Tesla, you know, I'm not concerned with him splitting his time. We're going off of his execution here. And he's been an amazing leader. He's built an auto company that's really unrivaled in its autonomy and AI advantage, its software advantage, and its battery advantage.
- Tasha, what about the Cybertruck? Certainly, that has drummed up some excitement. Of course, it was mentioned a couple of times on the most recent earnings call. How important, or is it important at all, to the investment thesis?
TASHA KEENEY: What I think is so interesting about Cybertruck is it's just another way that Tesla is really efficiently producing cars. So the no need for paint or any coating, one single piece over the body of the car-- it's a lot cheaper to make than, say, the Model 3. Or at least the frame of it is.
So we think that the next generation vehicle that Tesla announced, which is going to be half the cost of the Model 3 and Y platform. That could potentially be a vehicle that looks similar to the design of the Cybertruck. And again, they do that because it's the most cost efficient way to produce these vehicles.
And if you have a robotaxi fleet that's bringing down costs, we think that an EV already makes a ton of sense for autonomy and a cost per mile basis. And this is just going to push Tesla even further over that edge of making an extremely efficient platform that will lower the cost of transportation for people globally.
- All right, Tasha Keeney, ARK Invest Director of Investment Analysis and Institutional Strategies, thanks so much for joining us here.