Why is Cathie Wood bullish on Tesla?

Cathie Wood Ark Invest: Cathie Wood and Tesla

Tesla shares continue to fall in 2022 - the stock dropped to its lowest levels since November 2020 - shares are down 65% this year. 

In the last month, the stock has fallen over 18%. Despite the fall, one investor is bullish on the Tesla stock - Cathie Wood. Let us see who she is and why she is bullish on the stock despite the continuous fall in share price. We will also look at what others are saying about Tesla.

Cathie Wood Ark Invest: Who is Cathie Wood?

Caithe Wood is an American investor and the founder and CEO of Ark Invest, an investment management firm which runs the Ark Innovation ETF.  

Ark Invest manages several actively managed exchange-traded funds (ETFs). Its Asset Under Management (AUM) has fallen from $17 billion at the start of the year to $6.395 billion.

Cathie Wood Ark Invest: Ark Innovation ETF share performance

Cathie Wood Ark Invest: Cathie Wood and Tesla shares - the numbers

• As per reports, Cathie Wood has bought a big chunk of Tesla shares last week as the stock fell to its lowest levels in more than two years.
• Her investment firm, Ark Invest, bought 74,862 shares of the electric-vehicle maker across three of her exchange-traded funds.
• The purchase was valued at around $11.7 million. Ark’s purchases in the final quarter-to-date come to around $88 million based on Tesla’s average trading price from October 3 to December 20.
• As per the regulatory filing (December 14), Tesla's chief executive officer Elon Musk sold approximately 21,995,000 shares of the company, or roughly $3.6 billion worth, during the three-day period ending December 14.
• ARK’s Tesla buys comprised 61,537 shares for the ARK Innovation fund, and 10,066 for the ARK Autonomous Tech. & Robotics ETF, and 3,259 for the ARK Next Generation Internet ETF.

Cathie Wood Ark Invest: Why is Ark Invest buying Tesla

Wood, in her latest interview, has said that Tesla is very aggressive at cutting costs and prices. 

In terms of manufacturing, we need a new EV scale, and she believes the count will increase from 8.5 million units globally this year to perhaps 60 million in 2027. Ark Invest thinks that Tesla is going to be at the forefront of that, and therefore their conviction there has not diminished.

Cathie Wood is a longtime Tesla bull and does not miss an opportunity to restock shares on the decline in their value as she did in the recent fall. Below are two reasons why she is bullish on Tesla stock for a long time:

• She likes growth companies, and Tesla fits perfectly in this category. The company has repeatedly projected higher targets, and more often than not, it has achieved them.
• Profitability is important for her, and Tesla is continuously working on its gross margins to increase profitability.

Tesla share price: What are analysts saying about Tesla

Goldman Sachs: The firm in its report last week has maintained a BUY rating for Tesla but has slashed the target price to $235 from $305 as it still sees positive long-term prospects. The analyst at the firm said that they believe that Tesla remains well-positioned for long-term growth as an EV cost structure and full solution leader. The firm believes that passing reduced costs on to consumers, and factors like expanding leasing programs and consumer tax credits, could help Tesla to drive growth and margins. 

Citi: Citi's analysts' have reiterated a Neutral rating and $176 target price target for Tesla shares. The firm said that Tesla's share price recent weakness is primarily due to continued macro/demand/pricing concerns, with the most recent data point coming from weekly China insurance sales data for the 2nd week of December.

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.