Cathie Wood: “I Would Sell Tesla Next Year If It Reached $3,000”

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Speaking at a news briefing at the Morningstar Investment Conference on Wednesday, Ark Invest’s CEO Cathie Wood said of Tesla Inc (NASDAQ:TSLA) stock: “If nothing were to change in our outlook and we got to $3,000 next year, my guess is that we would be peeling out of it.”

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Q2 2021 hedge fund letters, conferences and more

Tesla Stock

With Tesla stock worth around $750, Wood said at the event that her base price target in five years was $3,000. Her assertion came amid a debate she held with Research Affiliates chairman Rob Arnott, who showed himself skeptical of high valuation growth stocks like those of the automaker.

During the conference, as recollected by Bloomberg, Arnott had asked Wood how investment managers could know when to get out of positions.

“What’s the sell discipline that can protect those gains?” he said. “What’s the sell discipline that can rotate you into undiscovered disrupters where the market is unaware of what they’re doing?”

She went on to name the benefits of electric cars but mentioned the price declines in battery pack systems. Amid this fall, Wood said she thinks that the average price of an electric vehicle will fall “below that of a gas-powered car in the next year or so.”

The phenomenon would spread into 2025 when she foresees that an average electric vehicle could be worth $18,000, while a regular gasoline car could reach the $25,000- $26,000 range.

Pricing Delusion

Rob Arnott has attacked Tesla in the past by stating that “The electric vehicle industry, with its astronomical growth in market-cap over the 12 months ending January 31, 2021, is a prime example of a big market delusion.”

In a co-authored paper earlier this year, Arnott said, “At that market capitalization, Tesla accounted for about 75% of the total EV group’s market value and 35% of the market value of the entire auto industry.”

“Such an immense market capitalization makes sense only if the expectation is that Tesla will come to dominate the entire auto industry, not just the EV market.”

According to MarketWatch, Tesla shares closed up 1.7% to nearly $752 on the event’s day, while “Year-to-date, Tesla shares are up about 6.5%, versus a 743% rally in 2020, and a 25% gain in 2019.”

Tesla is part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their founders’ families.