Tesla (NASDAQ:TSLA) has held up relatively well this week in light of weakness in the S&P 500 and Nasdaq 100. The electric vehicle (EV) manufacturer reported Q1 earnings on Wednesday, blowing away analyst expectations. Revenue came in at $18.76 billion, topping expectations of $17.8 billion. Regulatory credits accounted for $679 million in automotive revenue. On top of that, earnings per share (EPS) came in at $3.22, which beat expectations of $2.26 per share by a wide margin.
Despite the impressive earnings beat, Cathie Wood reported selling TSLA stock on Wednesday and Thursday. Here’s why.
Cathie Wood Sells TSLA Stock
On the same day that Tesla reported earnings, Wood sold $66 million of Tesla, or 67,884 shares. The fund manager owns the EV company through three of her exchange-traded funds (ETFs): Ark Innovation ETF (NYSEARCA:ARKK), Ark Autonomous Technology & Robotics ETF (BATS:ARKQ) and Ark Next Generation Internet ETF (NYSEARCA:ARKW). The next day, Wood sold another $94 million of TSLA stock, or 93,160 shares. After the sale, the three ETFs still hold 1.39 million shares of Tesla.
In an interview with Bloomberg earlier this month, Wood explained, “We have been selling (Tesla) recently because of how well it has done relative to the rest of the stocks in our portfolio. It has been a good source of cash, and we have taken profits and deployed them into other stocks that we feel have been unfairly punished.”
Wood has also previously stated that Ark ETFs have a “self-imposed” restriction limit on investing 10% of an ETFs assets into a single company. As a result, she often sells Tesla when its allocation gets to or near 10%. As of yesterday, Tesla accounts for 9.36% of ARKW, 10.5% of ARKQ and 10% of ARKK.
Wood Believes Tesla Will Hit $4,600 By 2026
Earlier this week, Wood adjusted her Tesla price target for 2026 to $4,600. The bull case price target is $5,800, while the bear case target is $2,900. Ark assigns the bull and bear scenarios with a 25% probability.
Wood and her team believe that Tesla’s potential robotaxi business will be very profitable and contribute more than 50% of Tesla’s value by 2026. In the Q1 earnings call, Musk stated that Tesla is aiming to produce a vehicle in high volume by 2024 that is “highly optimized for autonomy, meaning it would not have steering wheels or pedals.”
Finally, Ark believes that Tesla will sell 10 million EVs in 2026 under the bear scenario. In the bull scenario, the investment team expects Tesla to sell 17 million EVs in 2026. In 2021, Tesla delivered 936,172 EVs worldwide.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
