Cathie Wood will soon have a new Tesla target price. Here’s where it might be.

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Technical disruption guru and ARK Investment founder Cathie Wood says her firm will set a new price target

Tesla

stock soon. No one knows exactly when, but when it arrives, it will be a big deal for Tesla fans.

The question for investors is what price is likely for Tesla (ticker: TSLA).

Wood recently told Barron’s Jack Hough that the minimum return expected for a stock going into her portfolio is 15% per annum for five years. “It’s a doubling in five years,” Wood said.

It yields 15% per annum for five years. There’s a useful rule on Wall Street, also called the ’72 rule ‘. The number 72 divided by the annual rate of return gives investors the years needed to double a stock. This is an approach, but pretty good. With 15%, the rule of 72 equation yields 4.8 years. It actually takes about 4.96 years before an investment doubles 15% per annum. Still not bad.

Wood told Hough that Tesla shares would do “significantly more” than the 15% hurdle in its strongest case for Tesla shares at current levels. Exactly what means significantly better and what the current levels are, one might guess. An annual return of 20% per annum will yield a total return of about 150% over five years. This is significantly more than 100% earning 15% per annum in five years.

In terms of levels, the Tesla share has averaged around $ 650 over the past few days. This could mean that Wood’s bear fall by 2026 is around $ 1,600 per share.

This leaves investors with basic and bull-cases to investigate. The Tesla share has averaged about 70% a year over the past five years. A repeat of that would put Tesla shares above $ 9,000 per share, which would make Tesla shares worth about $ 9 billion. It can be too aggressive.

Amazon.com

(AMZN) shares have averaged about 40% per annum over the past five years. If Tesla can achieve the return, the share will reach about $ 3,500 by 2026. That would make Tesla share worth about $ 3.5 billion, which is more than all other car stocks by a factor of two. Maybe it’s wise to cut the figure to $ 3000.

Right in the middle of the bear and bull boxes is a good guess for the base bag. It yields $ 2,300 per share. By $ 2026, Tesla shares would yield an average of about 28% per year.

Wood’s target price for Tesla’s share over five years could easily be north of $ 2,000. In 2018, Wood made a legendary call that Tesla would earn $ 4,000. That was before the stock split 5 for 1. Her call is for $ 800 a share, a level that Tesla reached at the end of 2020.

Rising from $ 800 to $ 2,000 might seem like a bit. How could things have gotten so much better less than three years after the initial $ 800 call? Well, Tesla made money faster than expected, EV battery costs kept falling and more carmakers committed themselves to an all-electric future.

Things are better for EVs.

Wall Street’s highest Tesla target price is from Piper’s Alex Potter at $ 1,200 per share. Wall Street target prices are usually the case where analysts expect prices to rise over the next 12 months.

Tesla shares have gained some momentum lately. Shares have fallen by about 15% so far this year, behind the returns of the

S&P 500

and

Dow Jones Industrial Average.

Business execution does not seem to be the issue. Fear of inflation and higher interest rates have recently hit the prices of very high growth stocks.

Tesla is a growing company. It expects volume to increase by an average of 50% per year in the foreseeable future.

Write to Al Root at [email protected]