Tesla, Inc. has been facing fundamental challenges and a cautious investor sentiment, leading to its stock trading considerably below its yearly highs. However, Ark Investment Management, led by Cathie Wood, continues to maintain an optimistic outlook on the company.
In their weekly “Ark Disrupt” innovation newsletter, Ark’s Director of Investment Analysis & Institutional Strategies, Tasha Keeney, addresses concerns surrounding Tesla’s upcoming Cybertruck. Despite Tesla CEO Elon Musk’s reference to potential difficulty in the production ramp-up, Keeney does not attach much significance to it. She points out that Tesla has experienced challenges with volume production ramps before, such as the notoriously over-engineered Model X and the production hell of the Model 3. Keeney notes that the manufacturing complexity of the Cybertruck, with parts unlike any other Tesla model, may result in higher costs in the short term.
Another factor that has raised concerns is Musk’s expression of worries about the rapid rise in interest rates and its impact on consumer purchasing power for big-ticket items. With inflation on the rise, the Federal Reserve has implemented aggressive rate hikes, reaching a 22-year high. Keeney highlights that auto loan delinquencies exceeding 60 days have reached levels comparable to those during the 2008/2009 recession. However, some experts believe Musk may have overplayed the macroeconomic card, as Tesla’s EV monthly payments are currently lower than they were 12 to 18 months ago due to lower prices.
Despite these challenges, Ark Investment Management maintains its belief that Tesla remains years ahead of the competition in producing cost-effective, high-performance electric vehicles. Keeney emphasizes Tesla’s development of a powerful supercomputer and its vast real-world driving data advantage, positioning the company as a leader in autonomous electric transportation.
Tesla continues to be a top holding in Ark’s major exchange-traded funds, including ARK Innovation ETF (ARKK) and ARK Autonomous Technology & Robotics ETF (ARKQ). The firm holds $729.30 million worth of Tesla shares across these three ETFs.
While Tesla’s stock price has experienced a decline, it’s important to keep in mind Ark Investment Management’s positive long-term outlook for the company.
Source: Benzinga Pro
Q: What are some manufacturing challenges faced by Tesla’s Cybertruck?
A: Tesla’s Cybertruck is facing manufacturing complexity due to its unique design, resulting in higher costs in the short term.
Q: How have interest rate hikes impacted consumer purchasing power for Tesla?
A: Tesla CEO Elon Musk expressed concerns about the rapid rise in interest rates reducing consumer purchasing power. However, some experts argue that Tesla’s EV monthly payments are currently lower than they were in the past due to lower prices.
Q: Why does Ark Investment Management maintain an optimistic outlook on Tesla?
A: Ark believes that Tesla is years ahead of the competition in producing cost-effective, high-performance electric vehicles. They highlight Tesla’s development of a powerful supercomputer and its vast real-world driving data advantage.