Investors who think Tesla shares are overvalued are discounting the fact that the company will be a major player in the autonomous taxi market, a $2 trillion opportunity, one fund manager told CNBC, adding that the stock could be worth "multiples" more than its current $51 billion valuation.
Last year, Tesla CEO Elon Musk announced his intention to begin a Tesla ride-sharing platform when regulators approve fully self-driverless cars.
"When true self-driving is approved by regulators, it will mean that you will be able to summon your Tesla from pretty much anywhere. Once it picks you up, you will be able to sleep, read or do anything else en route to your destination," Musk wrote in his "Master Plan, Part Deux" last year.
"You will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you're at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost. This dramatically lowers the true cost of ownership to the point where almost anyone could own a Tesla."
Musk's plan poses a challenge to the likes of Uber, but also allows the company to tap into the autonomous taxi market, which could be worth $2 trillion globally in the next few years, according to research carried out by ARK Invest.
Catherine Wood, the CEO of ARK Invest, said that many investors who think that Tesla is overvalued are missing the fact that Tesla could be a major player in the autonomous taxi market.
"If we are correct and Tesla gets its fair share of the US autonomous taxi market, not to mention China's … then Tesla will be multiples of today's $51 billion market cap in 2020," Wood told CNBC by email on Friday.
"We are astonished after listening to every Tesla earnings call that no analyst asks about the autonomous taxi network opportunity. Very little of that potential – even if Tesla gets only 10 percent of the $2 trillion global market – has been priced into the stock."
Model 3 target
In a TV interview with CNBC earlier in the day on Friday, Wood said she considers Tesla a technology rather than car company and therefore it's higher valuation versus auto stocks is fair.
The company is ramping up production of its Model 3 car – its lower priced variant out of all of its vehicles which is aimed the mass market. Earlier this month, Musk said the company would build a total of 500,000 all-electric vehicles in 2018.
In 2016, Tesla produced 83,922 vehicles, and Wood said it would be a big jump for the company to produce 500,000 next year, but she said it would get closer to the figure than the market is expecting.
"Nobody is really expecting that but we think they're going to get closer to 500,000 than most people think."
Disclosure: ARK Invest's funds own shares of Tesla.
