How High Will Tesla Stock Reach?

As I write this post on April 15, 2024, Tesla stock is valued at $166.52. And it’s down 2.65% from the previous day. However, the current value is not of much concern to anyone these days. After a famous investor weighed in, the question in all investors’ minds seems to be: How high will the Tesla stock actually get in the future?

Why are we asking this question?

In the beginning of April 2024, as Tesla sat down more than 20% year to date, Cathie Wood went on CNBC and was asked what her 5 year projection high for the Tesla stock was.

Her answer: $2,000!

In fact, that was the “average” value her investment firm, ARK, provides. The “bull” projection was up to $2,500.

As she confidently followed up, this would be a greater than 1,000% increase from today’s value.

This would be a huge rise in value to put it mildly. To put it in perspective, average projections of other managers are in the range of $196. But, if we believe Cathie’s projection, we should all be buying up crazy amount of the stock!

And, to be fair, that’s just what Cathie Wood did. In late March, her Wood’s Ark Innovation ETF bought 65,514 shares of Tesla. If her projection holds true, the value of her fund would explode.

Why does she think the Tesla stock high will rise so much?

It’s not for the worst reasons.

As she explains, she bases this projection on a few factors:

She believes most auto sales will be electric in 5 years
Tesla is a versatile company with its hands not just the auto but also the growing robotics, AI, and data storage industries
A potential impending “auto taxi” revolution spearheaded by Tesla

The biggest factor she cites is the third reason listed above.

Imagine a fleet across the country of self-driving robotic taxis shuffling people to and from work, home, restaurants, and everywhere else? This would fill a huge consumer need.

Now imagine one company being uniquely positioned to take advantage of this need pretty immediately. That company would be in line for huge profit and gain in value.

It’s not hard to connect the dots and see how one could project quite a high stock price for Tesla.

So, is Cathie Wood right? Will Tesla stock reach as high as $2,000?

Well, here’s where things get sticky.

Because there is only one answer: We have no idea. No one can tell us otherwise. Not me. Not a Wall Street insider. Your family. Not the other doctor in the lounge with you. No one.

We can speculate all we want.

Yes, we can paint a very compelling picture of how Tesla is in position to take advantage of an impending fleet of auto taxis that will revolutionize travel in the world.

The problem is that we can just as easily paint a very compelling negative picture. In April 2024, Tesla famously settled a suit that blamed Tesla for the death of a driver due to its autopilot feature. Maybe self driving cars aren’t right around the corner? Maybe other company is closer? Or maybe regulations get in the way of this technology ever taking off?

Who knows? And that’s exactly the point!

But c’mon, Cathie Wood is bullish. Why else would she say this?

This is going to be a cynical take. I’ll grant you that.

But, if my fund just bought a whole ton of something, even if I believed in it, it would benefit me to build it up and shout its virtues from the rooftop. Why? Well to stimulate interest and buoy up its stock price. This would help her in the short as well as long term. This is exactly how the castle in the air theory of stock investing works…

Is this the primary reason that she says this? No, I don’t think so. But on some less than conscious level it plays a role.

It may even underlie some self doubt. Because if I really was confident it was going to $2,000, I’m not sure I would tell anyone. I would just buy more. But now it’s me who is speculating…

Ok fine, but Cathie Wood is an investing guru. She must know what she’s doing?

You’re right. She knows a lot about investing.

But she still can’t beat the averages. Sure, she has for various years. But, over the long term, she has failed along with 80% of other actively managed portfolios compared to a passively managed portfolio of index funds.

In fact, since 2014, her famous ARK fund has underperformed the market. Most investors are surprised to hear that because all they remember in the 2020-2022 peak of the ARK fund. But before that and since that, not so hot. The problem is that peaks like that get media attention. Slumps not so much.

But she can’t be that wrong about such a big successful company, right?

Yes, experts have been that wrong about big, successful companies in the past.

One word: Enron.

In the last 1990s and early 2000s, Enron was the darling of investors. They won numerous awards and topped stock lists from experts.

Ask anyone who invested in Enron how that went today. The company obviously famously catered due to fraud beyond compare. Investors lost all of their money.

Now, I’m not saying that Tesla is hiding losses or committing fraud. That’s not the point. The point is that we just don’t know what will happen to any one company in the future.

We, including experts, are often wrong.

What do we do with all of this?

After a lot of back and forth, we kind of are back where we started.

I wrote this post because it’s a fantastic example of how active stock picking is akin to speculation or sports gambling.

The problem is that active investing in stocks is so darn attractive even though it doesn’t work. I have to admit that when my partner first brought this CNBC interview to my attention I got a bit tempted. What if I invested in some Tesla stock? If it actually does go to $5,000 in 5 years I’ll basically achieve FIRE on that alone!

Now, thanks to my written financial plan detailing what I will (passive investing on stocks) and won’t (stock picking) do investing, it was easy to curtail my temptation. But I promise you it was still there.

What we need to do is to remember the basics:

The overall stock market has steadily trended upward over any long term time period in its history
Passive investing strategies using low cost, broadly diversified index funds beats active investing strategies 80% of the time
Active investing strategies accrue more taxes and fees, further eating into its performance compared to passive investing
If you save at least 20% of your gross income and invest it in index funds over the long-term, you will reach financial freedom as a doctor (Just follow these 7 steps!)
Therefore, there is no reason you need to take more risk by speculating or gambling on individual stocks, which no one can predict accurately (see above)

And that’s all there is to it

In the end, who knows if Cathie Wood is right? Or I am right and it won’t go near $2,000?

And that’s the point. No one can answer that question. But data shows that we are both way more likely to be wrong than right. And even if were are right, we are no more likely to be right with our next projection or stock pick.

Don’t believe me? Write down what you think the Tesla stock will be in 1 year. Actually get even more vague, do you think it will be up or down? Check if you are right in a year. It’s a humbling experiment.

So, it makes a lot more sense to find an investing strategy that doesn’t rely on me or you or Cathie or anyone being right!

And if you really can’t resist, at least employ a satellite investing strategy where your individual stock investments are a small portion rotating around a core of index fund investments!

Here are some additional posts discussing technical stock investing and the interplay between active and passive stock investing strategies:

You can also check out my best-selling book, Money Matters in Medicine!

What do you think? How high will the Tesla stock get? Why or why not? Have you put your money where your mouth is? Let me know in the comments below!