Well, Kathy Wood has a new massive price Target out for Tesla But instead of talking about 2025 in order to expand the valuation and hit the news cycle, Kathy has decided to move out to 2027.. generally Kathy talks about five-year visions and the five-year Vision has always been ending in 2025. But now that a couple years have gone by, it is time to talk about 2027. And Kathy Wood suggests that Tesla's expected value per share is more than 10 times what the share price is today.

Tesla Share price today is sitting at 161.92 slightly trending down today. But what do we have here? An expectation of two thousand dollars per share, two thousand dollars per share divided by 161.9 puts us out actually at 12.3 X from today's price. Now why do they suggest this? What do their models show and what do we have in the different cases? Well, here we go: Arc has a model and their model projects the following: an expected value of two thousand dollars. This is their base case scenario.

A bear case scenario with a 25 probability. Now Tesla ends up being worth fourteen hundred dollars per share. So their bear case folks is that Tesla only 6.7 or sorry 8.7 X's within the next four years. and the bull case is that Tesla ends up being worth twenty five hundred dollars or a multiple of 15.5 x.

Now let's understand potentially why Tesla's perspective: Robo Taxi business. Well, according to Orc, be the key driver contributing to what they believe 58 of the value of the company and 45 of their earnings. That's because they believe that cars will only represent about 62 percent of the company's Revenue Uh, at substantially lower margins than Robo taxi network? Uh, Now this is interesting because really, you're hitting on that sensitivity here of a lot of people talking Tesla Down Right now, because margins have fallen, they're still phenomenal industry-wide but they fell below expectations of less than 20 percent gross margin. So in other words, every 100 that Tesla makes per vehicle, their gross margin has fallen below 20 dollars of gross profit per vehicle.

And so I Think this is sort of a way to sort of defend and suggest, hey, let the electric vehicle sell at a lower margin. But we actually think in a sort of base case scenario that Robotaxing is going to massively Drive the value value of this company that Robo taxi revenues might only be 25. but because their margins are going to be so high, they'll represent 45 percent of the company's actual profits and 58 of the company's value. In other words, they believe at ARC that the car business is only going to be worth one-fourth of the valuation for Tesla.

So in other words, if we take two thousand dollars per share by 2027. Kathy is suggesting that only 560 dollars of the share price will actually be because of the car business. So write that out so you can see it of a two thousand dollar 2027. Target You're looking at five hundred and sixty dollars of that would be because of the cars, whereas it appears 58 or approximately 1160 dollars per share will be because of Robo taxi.

So for example, if you think Robotaxi is nonsensical, then maybe your price Target is 560 based on Kathy's analysis. Plus, of course, a little bit of revenue for stationary, free energy insurance, and human driven ride hailing now. I Actually think it's interesting that stationary energy storage is so low here given the explosion recently in Tesla's storage uh, division. So this would be a question that I have for Brad is why such nominal forecasts for energy storage.

It's possible that Arc believes that energy storage will be a growth business for Tesla but nowhere near to the level that Robo taxi could end up being or just really autonomy. So let's see what other inputs and outputs we have here. So in 2027 in a bear case, Tesla believes that or Arc it believes that Tesla will sell 10.3 million Vehicles Wow, whereas in the bull case, Arc believes that Tesla will sell 20.7 billion. Vehicles Now, what's remarkable is they've really reduced their average selling prices substantially here.

and now this could potentially be a little bit concerning given that in the last presentation that Arc did, they believed that in 2025, the average selling price per Tesla would actually be forty five thousand dollars. It appears to me that Arc has revised their models to suggest Tesla is going to sell vehicles a lot less per vehicle than previously thought. However, they're providing substantial revenues because of electric vehicle revenues. We got those.

Where is it? Here it is Autonomous Ride Hailing Revenue Now I Think this really assumes that Tesla is going to be able to get to not just full autonomy uh, at at you know, a level of 99 satisfaction, but to a hundred percent full autonomy because the last thing you want are Teslas using the uh last Hardware set which is most Teslas uh, that is a hardware three. The last thing you want are these tassels being 99 effective, but you still need to have a human driver because even Kathy believes that human-driven ride hailing would be representative of a nominal amount of Revenue relative to autonomous. Now I Think that's interesting because Tesla hasn't even indicated any interest yet in getting into uh, human Driven ride hailing. There is talk about Robo taxi and there is talk about that next Generation vehicle that could be Robo taxi.

But so far we haven't really heard about that because we're just not at those FSD levels yet. I Did notice that in their model it doesn't appear that they're including FSD Revenue but that's probably because they're baking that into the average selling price. But that actually makes the average selling prices look even worse for these vehicles. So I'm not exactly sure where that FSD is unless of course that's showing up in in the right hailing segment segment.

which maybe it is. but I think there's a potential flaw in not segmenting out the FSD so we could see that a little bit more clearly to understand. Okay, how much do they actually think these cars are going to sell for? and how much of that could be? FSD Either way, the expectations here about this massive Revenue Set Uh, from Autonomous Ride hailing? Uh, you know it's I I Don't know what to think about it? Maybe I don't know what to think about it yet because we're in a situation where we haven't yet. uh, realized.

Okay, uh, what? Um, what? What does full self-driving without a driver actually look like for Tesla right? So it's hard to speculate on what this sort of autonomous ride hailing Network could look like when we haven't even gotten to that state of Technology yet. not only uh, at a Tesla but where we have, it's been with a totally different system. If you look at where we have achieved this sort of self-driving like Waymo, it's a lidar based system and theirs isn't perfect, but it's pretty good. Uh, and in some cases it drives around without a driver.

It's pretty decent. Tesla uses a completely different system. It's Vision based rather than lidar based and more sensor based so we haven't actually seen Tesla be able to pull it off yet. with the exception of if you have FSD you could drive around in your town and go.

Hmm. Tesla can get through most scenarios and I agree. It could get through 95 of my daily commute on basically full autopilot. But let's take a look at some of the other comments made by Arc here: A recent flurry of progress in AI should accelerate Innovation and autonomous driving in the autonomous driving industry.

In our view, Tesla's vertical integration strategy in Dojo training supercomputers are a key competitive Advantage Suggest suggesting that Tesla's plan to expand Dojo by two orders of magnitude next year will help the company shorten time between model updates. That's for your FSD model updates A recent video of FSD software updates uh or update includes One driver who nearly completes a full ride hail without touching the wheel. The problem is this nearly question, right? When is that nearly going to go away? When are we going to get to without touching the wheel at all? Yes, we know that Tesla has actually now over 150. Uh, let's see here: Tesla a own Fleet drives more than 120 million miles per day, right? But but in over 1 million miles per day in FSD We just got information from Elon Musk that we're at 150 miles of FSD 150 million miles of FSD uh driven miles which is fantastic which is great.

Uh, Tesla's Capital efficiency Of course the company is is one of the most efficient in terms of factory production. We hope that continues that way. Uh and Tesla should be able to grow quickly as the expectation here. Uh, they do give us a 6.6 billion dollar contribution to Enterprise uh or two three percent expected Enterprise Value in 2027..

I actually think that's relatively low and I think we could see this battery capacity for energy storage uh, really be a substantially a bigger percentage of their Uh of their valuation in the future. But then again, Arc also has the impression and they may be right, that an electron is an electron and that really, it's not that big of a deal to focus on batteries. You should be focused on where the actual consumer value is. because the consumer doesn't care about the battery, they care about range and function and use.

and the reality is, they're right about that now. Uh, Here they quote Elon Musk or paraphrase him, suggesting that autonomous ride hailing will probably be the biggest asset value in history. This is very optimistic. assuming that Tesla can pull off their FSD and I think that's really where we want See, They even say themselves.

our simulation is highly sensitive to the year in which Tesla launches Robo taxis and I think that all comes down to how great FSD is now. Elon Musk suggests FSD could be a hundred percent done by the end of this year, but then again, we've kind of been hearing that for years now. so I think it still remains to be seen when we're actually going to get 100 driverless Tesla And at that point, yeah, maybe just maybe these projections could be right. But if it takes us another 10 years to get to 100 driverless on a vision based system, these valuations fall apart and even Arc realizes that's the Achilles heel in this model.

In my opinion, it's better to take out any kind of expectations for uh, Robo taxis. Let that be the icing on the cake and just look at Tesla as a vehicle provider that also sells software and for me, those numbers put me well above a 400 price Target by 2025. if we get any icing on the cake until or by then, hey, fantastic and look: I Love hearing about these high valuations because obviously I'm a big uh, a fan of Tesla I'm an investor in Tesla and I'd love this to happen I'm just not convinced that we're just ready yet for this and I do also think that it's interesting here that they suggest in their five-year investment Horizon that the Optimus robot will basically not contribute significantly to Tesla's valuation. In other words, they're projecting no progress on the robot or on the Optimus.

So really, Arc is saying the Optimus is their icing on the cake. I'm saying Optimus and Robo taxi is the icing on the cake for me. I'm just gonna look at this as a high margin business that's selling a great product and a great service for their customers and hopefully that continues. and I agree with Elon Musk that the sunshine comes out in 2024 and overall I'm pretty bullish.

I'm also bullish on hopping over to the course member live stream and reminding you to join me in the course member live streams tonight before 7 pm today when we make that massive transition and folks see you in the next one. But in the meantime some pretty cool news there on Tesla and uh, hopefully you uh, get to participate in this uh, hopeful and explosive growth of Tesla and this concludes Eric's peace on Tesla Thanks so much for watching I Gotta run to the course member live stream and we'll see in the next one. Goodbye folks Thank you.