Tesla (TSLA) has an enormous competitive advantage that’s incredibly undervalued in the market.
That’s the thesis behind ARK Invest’s bullish projection of a $700 to $4,000 stock price for the company (which may or may not be taken private for $420). The company’s chief investment officer, Cathie Wood, sent a letter to Elon Musk on Wednesday imploring Tesla to stay public.
In an interview with Yahoo Finance, ARK’s Tasha Keeney acknowledged that the bullishness was against much of the market’s collective wisdom, but explained ARK’s rationale.
“Tesla’s the only company that’s collecting data off of its customer cars on the road,” said Keeney. “People often underestimate Tesla, but in the autonomous world, Tesla has more scale.”
‘This is something no other automakers have done’
The scale is key, ARK contends, because the business model for cars will change to a network of vehicles once autonomous vehicles take off in earnest.
“We think the business will have software-like margins, so it totally transforms the business model,” Keeney said. “We think the autonomous opportunity is the largest market opportunity ahead of Tesla.”
If this is true, Tesla will be in a much better position relative to other manufacturers, because of its data advantage. Other car-makers, Keeney said, have not equipped cars being sold with anything like Tesla’s data recording. Tesla cars can also receive over-the-air updates to improve them, something other cars do not have.
“That Volvo that you buy, the tech stays the same the moment the car leaves the lot,” Keeney said. “A Tesla improves over time. This is something no other automakers have done.”
Since autonomous driving uses artificial intelligence and machine learning to improve, Tesla’s data library with billions of miles worth will be incredibly valuable.
“The way these machine learning systems improve is feeding them massive amounts of data,” Keeney said. “So other automakers are years behind because they haven’t started doing this yet.”