It hasn’t been the smoothest of rides for Tesla for this year, but some sell-side analysts are again warming to the electric vehicle (EV) maker, and that could spark some upside for the famed ARK Innovation ETF (NYSEArca: ARKK).
“Companies within ARKK include those that rely on or benefit from the development of new products or services, technological improvements and advancements in scientific research relating to the areas of DNA technologies (‘Genomic Revolution’), industrial innovation in energy, automation, and manufacturing (‘Industrial Innovation’), the increased use of shared technology, infrastructure and services (‘Next Generation Internet’), and technologies that make financial services more efficient (‘Fintech Innovation’),” according to ARK Invest.
At least one analyst is highly enthusiastic on Tesla, which is one of ARKK’s largest components.
“Cannacord analyst Jonathan Dorsheimer upgraded Tesla (ticker: TSLA) shares to Buy and increased his price target from $419 to $1,071. That represents a 124% boost to his previous target price,” reports Al Root for Barron’s.
The Bullish Case for Tesla
ARKK’s Tesla allocation is meaningful in that Elon Musk’s company consistently proves adaptable. It’s also winning the EV battle in terms of $/charging rate, or miles of range added per minute of charging.
One of the key components in evaluating growth strategies is execution. ARKK boasts the benefit of active management, meaning it can target areas often overlooked by traditional passive rivals.
“Dorsheimer’s case is built around all of the different businesses Tesla is now involved in. He believes the auto maker is similar to a platform company like Apple (AAPL). Apple sells hardware such as phones and computers,” according to Barron’s. “It also offers music, entertainment, cloud, and other services on a subscription basis. Tesla, for its part, sells more expensive hardware–namely vehicles–and sells solar roofs and battery storage. It sells software and services such as self-driving upgrades for its vehicles and electricity via its nationwide charging network, too.”
Rapid adoption of EVs should be propelled by improving battery technology, favorable economics for buyers, and an acceleration in investment in EVs by automakers. Innovations in battery technology by EV companies also have had positive implications for the rest of the alternative energy space.
“Many analysts have focused on the potential of Tesla’s self-driving software and its future robotaxi service. Dorsheimer, however, believes energy storage is a large opportunity as well. He projects $8 billion in energy storage sales by 2025,” concludes Barron’s.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.