"Our confidence level that this stock is heading for $7,000 over the next five years is very high," Wood, the founder and CEO of Ark Investment Management, said on "Fast Money."
"We've arrived at that price by weighting the probabilities of 10 different scenarios, including bankruptcy, to be honest. So we've tried to be as fair and balanced as we could possibly be," added Wood, whose firm has about $11 billion in assets under management.
The firm's most recent best-case scenario is $15,000 per share by the end of 2024, while the bear case is $1,500.
Shares of Tesla have been a wild ride this week. The stock rose nearly 20% on Monday, which was followed by a 13.7% gain on Tuesday, when it notched an all-time intraday high of $968.
But the stock fell , closing the session at $734.70. Still, shares of the electric-vehicle maker are up 75% year to date.
Ark's five-year prediction of $7,000 is undergirded by a few critical assumptions that include increased demand for electric vehicles as well as Tesla's ability to maintain its market share and enhance margins by lowering the cost of batteries.
Already, Tesla is way ahead of its competitors around battery technology, both in cost and range, Wood argued.
"Their battery cost is three to four years ahead of any other auto manufacturer in terms of cost declines," she said.
If rivals such as BMW want to compete with Tesla, "they will have to sell their cars at a loss at the same time they're losing their internal combustion engine business," Wood said.
Perhaps the biggest uncertainty around Wood's price target, however, is its reliance on Tesla developing a fleet of autonomous-driving taxis.
Wood said those taxis could translate to software as a service type margins around 80%, creating the space for Tesla to reach $7,000 per share. Typical margins on selling a car are around 25% to 30%, she said.
"And we think that's what people are missing," Wood said. However, she added "we assume only a 25% chance that they're going to be up and running with autonomous within two to three years."
But so far, optimism around autonomous vehicles is far ahead of anything close to widespread adoption. A truly autonomous vehicle does not yet exist.