Cathie Wood Bets Big on Tesla’s Future: Can It Deliver?

Cathie Wood is among the most prominent supporters of Tesla (NASDAQ: TSLA). The electric vehicle (EV) manufacturer holds the top position in two of Wood’s Ark Invest exchange-traded funds (ETFs) and is the leading asset for Ark Invest overall.

According to Wood’s projection, Tesla’s stock price could potentially increase nearly nine times by 2029. Yet, this optimistic forecast soon faces significant testing.

Wood’s Tesla Projections

Wood and her Ark Invest team anticipate that Tesla will significantly ramp up EV sales over the next four years. They project that Tesla’s sales will rise from approximately 1.8 million units in 2024 to around 14.4 million by 2029.

Nevertheless, Wood’s optimism stems not just from sales growth. Ark Invest estimates that nearly 90% of Tesla’s future earnings will come from autonomous ride-hailing services, commonly referred to as robotaxis, within four years.

Initially, Wood expects Tesla to operate its own robotaxi fleet. However, she believes that eventually, third-party companies will manage these vehicle networks, generating recurring revenue for Tesla. Ark Invest envisions a transformation of Tesla’s business model, framing each car as an “AI-powered cash flow-generation machine.”

In a recent interview with Barron’s, Wood mentioned that consumers may find financial savings by utilizing Tesla’s autonomous ride-hailing service instead of purchasing new vehicles. She also contends that Tesla’s robotaxis will be more affordable than services from Uber Technologies and Lyft.

Notably, Wood’s mid-range target of a 9x price increase for Tesla by 2029 contrasts with her more bullish scenario, which suggests the stock could surge an incredible 11x higher over the next four years.

Putting Wood’s Theory to the Test

Wood’s positive outlook for Tesla is heavily reliant on the launch of a robotaxi service. After prolonged anticipation, this development is imminent. In the company’s first-quarter earnings call, CEO Elon Musk stated, “The team and I are laser focused on bringing robotaxi to Austin in June.”

Musk believes that once the Austin service is operational, scaling to other cities could be rapid. He expressed confidence to analysts, predicting robotaxi operations in many U.S. cities by year-end.

However, Tesla faces competition. Alphabet‘s Waymo already operates robotaxis in Austin, Los Angeles, Phoenix, and San Francisco, with further expansions planned. Uber is collaborating with Waymo and May Mobility, while Lyft has partnered with May Mobility for its own autonomous service expected to launch in Atlanta this summer.

How Tesla will compete against these established players remains unclear. Musk pointed out in the earnings call that Waymo’s vehicles are costlier and produced in lower volumes, giving Tesla a competitive edge. Yet, Waymo’s first-mover advantage and alliances with major auto manufacturers could work in its favor. Signs indicating the validity of Wood’s bullish projections for Tesla’s robotaxi market will soon be apparent.

Tesla’s Current Challenges

Amid these predictions, Tesla faces significant hurdles. The company’s stock has declined by approximately 30% this year, with Q1 revenue falling by 9% year-over-year. Analysts noted Tesla missed both revenue and earnings estimates amidst ongoing uncertainties related to tariffs introduced during the Trump administration.

However, Musk opines that Tesla’s North American manufacturing focus will offer some insulation against these tariffs. He emphasized during the Q1 earnings call, “We’re more localized than any other manufacturer, and we have numerous initiatives to further enhance localization, reducing supply chain risks associated with geopolitical uncertainties.”

Wood shares this perspective. The upcoming months will likely clarify whether her optimistic predictions regarding Tesla hold true.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.