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Fund manager with $4,000 Tesla target says this is the next big thing for stock

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This is where Tesla heads next, top fund manager says

It's not even the end of the first quarter, but Tesla is already tracking for its worst year on record. 

The electric auto stock is down more than 15 percent since the beginning of January, its first negative year since 2016, after the company warned of a loss in its first quarter and as CEO Elon Musk continues to raise the SEC's ire.

ARK Invest CEO and CIO Cathie Wood, whose ARK ETF (ARKK) has topped the market this year, says Tesla is set to rip high. Wood says over the next few years the stock will rise between 146 percent and a head-spinning 1,306 percent.

"This is a five-year time horizon," Wood said on CNBC's "ETF Edge " on Monday. "Four-thousand dollars is the bull case, $700 is the bear case. It's rare for us to a have a stock that meets our minimum hurdle rate of return in the bear case, so it's north of 15 percent compound annual rate of return to get to our bear case target."

Wood is so confident in Tesla's trajectory that the stock is the largest weighting in the ARKK at 9 percent. The second-largest weighting, Stratasys, makes up for 7.8 percent of the ETF.

Tesla is "scaling the electric vehicle market," said Wood. "We think the electric vehicle sales in 2023 will be in total globally 26 million units, up from 1.3 million last year, so that's a 20-fold increase. We're talking about exponential growth."

The automaker reported a production and delivery rate of nearly 1,000 vehicles a day in its fourth quarter. Production over the quarter hit an all-time high.

"But, that's not the big story for Tesla. The big story is autonomous taxi platforms. We're moving from a hardware-centric, low gross margin model which is 25, 30 percent to a transportation-as-a-service model. They'll get a piece of every ride taken because they'll own the platform that these fleet operators will be riding on, and that's more of an 80 percent gross margin business," Wood said.

While Tesla has underperformed this year, the rest of the ARKK ETF has rallied. Invitae and NanoString, two of its components, have surged by more than 80 percent, while Tesla has bottomed out the ETF with a 14 percent decline.

"The great thing about focusing on exponential growth and disruptive innovation is we should be able to grow exponentially if we're right on these five innovation platforms that we think each should represent multitrillion dollar opportunities: DNA sequencing, robotics, energy storage, deep learning, blockchain technology," said Wood.

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The mind behind the ETF that's beating the market says Tesla is set to race higher