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Tesla investor says Thursday's stock surge is just the beginning of a push toward $4,000

Key Points
  • "Some of the shorts are covering," Ark Investment Management founder and CEO Catherine Wood. "I think the shorts are going to be forced to cover as time goes on."
  • The Tesla bears are "stretching to make a negative case now," says Wood, after the company reported a surprising third-quarter profit late Wednesday.
  • Tesla saw strong growth in overall revenue and unit sales "in an auto industry that is declining," says Wood.
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Ark Investment Management founder and CEO Catherine Wood told CNBC that Thursday's surge in Tesla stock is just the beginning of an eventual rise to $4,000 per share and possibly beyond.

"Some of the shorts are covering" as Tesla shares see their best single-session gain in six years, said Wood, whose firm owns a considerable stake in the electric-auto maker. "I think the shorts are going to be forced to cover as time goes on."

In fact, with shares of Tesla in afternoon trading soaring about 17% to around $298 per share, those who short the stock, or bet it will go down, were losing an estimated $1.4 billion, according to S3 Analytics estimates. Tesla closed Thursday at $299.68, up 17.67% for the session.

The Tesla bears are "stretching to make a negative case now," Wood said on "Squawk on the Street," after the company reported a surprising third-quarter profit late Wednesday.

Tesla saw strong growth in overall revenue and unit sales "in an auto industry that is declining," she said. "We think total auto sales have peaked." Wood added, referring to Tesla's financials, "This is quite dramatic."

Ahead of Wednesday's Q3 earnings, Ark sold 150,000 Tesla shares. However, the investment group told CNBC that its "conviction in Tesla has not changed." Tesla is still the top holding in Ark's exchange-traded funds.

Ark analyst Tasha Keeney told CNBC's "Closing Bell" on Wednesday afternoon that the share sale was "more a portfolio management thing." Some of the Ark funds have rules that no one stock can be more than 10% of the portfolio. With the appreciation of Tesla relative to other names in the funds, the selling needed to happen, Keeney said.

Wood, who first predicted in February 2018 that Tesla would one day trade at $4,000 per share, reiterated her belief that Tesla's moves to position it as a leader in self-driving vehicles will serve to boost the stock.

Back in June, Ark explained its Tesla valuation model.

If Tesla does solve for full autonomy, however, and its electric vehicle (EV) production surpasses our bear case estimates, TSLA could scale significantly higher than our previous $4,000* price target during the next five years, thanks to our newly introduced bull case for electric vehicle volumes.

With just more than 179 million shares currently outstanding, Wood's Tesla target would translate into a stock market value well above $700 billion, approaching those of the world's biggest tech giants. But that would be a long road ahead, considering Tesla's current market cap is just over $53 billion and how volatile a stock Tesla can be.

In August, it was a year since Tesla shares jumped to near-record levels as CEO Elon Musk tweeted he had "funding secured" to take the company private at $420 per share. Those plans were abandoned weeks later.

The now-infamous tweet on Aug. 7, 2018, resulted in an investigation and a settlement about seven weeks later with the Securities and Exchange Commission, which removed Musk as chairman of the board.

The SEC has accused Musk of making "false and misleading" statements. Musk, at the time, called the allegations "unjustified."

Disclaimer

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