I love ARK Invest and have devoured their research. Everyone should read ARK analyst Tasha Keeney’s research on self-driving cars. I think ARK’s Director of Research Brett Winton is the most fascinating person I follow on Twitter. ARK’s CEO Cathie Wood is eloquent, funny, passionate, and she has such a compelling contrarian take on investing.
Here is Cathie Wood explaining her view of Tesla:
The open letter Cathie wrote to Elon is now published, and the best part is it contains ARK’s models and price targets for Tesla 5 years from now. Check out the charts at the bottom:
Dear Elon: An Open Letter Against Taking Tesla Private - ARK Investment Management
With 4.2 million autonomous taxis, ARK forecasts that Tesla will generate $36.2 billion in cash flow. I’m not sure whether this is operating cash flow or free cash flow. Maybe someone who understands the chart better than I do can clarify that. If operating cash flow, the historical average cash flow yield of 9.4% for S&P 500 companies would justify a $385 billion market cap. If free cash flow, the historical average free cash flow yield of 4.0% would justify a market cap of $905 billion.
(Side note: American stocks may be artificially inflated by 25% by bad policy in the post-Milton Friedman era that has led to a Tobin’s Q higher than other developed countries. That’s something to keep in mind when considering these historical multiples. Policy reform may deflate the value of American stocks by 25% by reducing Tobin’s Q to levels on par with other developed countries, and effectively redistribute that wealth from shareholders to workers and other stakeholders. However, that same reform could lead to higher long-term economic growth and stock market performance. $289 billion or $679 billion is still a lot.)
Here is Cathie Wood explaining her view of Tesla:
The open letter Cathie wrote to Elon is now published, and the best part is it contains ARK’s models and price targets for Tesla 5 years from now. Check out the charts at the bottom:
Dear Elon: An Open Letter Against Taking Tesla Private - ARK Investment Management
With 4.2 million autonomous taxis, ARK forecasts that Tesla will generate $36.2 billion in cash flow. I’m not sure whether this is operating cash flow or free cash flow. Maybe someone who understands the chart better than I do can clarify that. If operating cash flow, the historical average cash flow yield of 9.4% for S&P 500 companies would justify a $385 billion market cap. If free cash flow, the historical average free cash flow yield of 4.0% would justify a market cap of $905 billion.
(Side note: American stocks may be artificially inflated by 25% by bad policy in the post-Milton Friedman era that has led to a Tobin’s Q higher than other developed countries. That’s something to keep in mind when considering these historical multiples. Policy reform may deflate the value of American stocks by 25% by reducing Tobin’s Q to levels on par with other developed countries, and effectively redistribute that wealth from shareholders to workers and other stakeholders. However, that same reform could lead to higher long-term economic growth and stock market performance. $289 billion or $679 billion is still a lot.)