Cathie Wood's Tesla Bet Pays Off Again. But How Long Can It Last?
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Cathie Wood, CEO of Ark Invest, oversees numerous exchange-traded funds (ETFs), including a family of funds that invest in nology stocks. These funds have had some success in the past,...
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July 7, 2025
08:05 PM
The Motley Fool
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Cathie Wood, CEO of Ark Invest, oversees numerous exchange-traded funds (ETFs), including a family of funds that invest in nology stocks
These funds have had some success in the past, with the Ark Innovation ETF (ARKK -0. 91%), the largest one under the company's umbrella, returning nearly 60% over the past year through June 30
That's nearly four times the Nasdaq Composite's 15. 7% return during that time
But the fund isn't necessarily for the faint of heart, given its concentration in the sector
It seeks to invest in companies at the forefront of "disruptive innovation
One of the Ark Innovation ETF's biggest winners has been Tesla (TSLA -6
As of July 2, the fund owned 2. 1 million s of the electric vehicle (EV) maker
That stake, worth over $630 million, represented 9. 6% of the fund's assets, making it the ETF's biggest position
But can Tesla continue to rocket upwards, or is it due for a crash landing
Image source: Getty Images
Tesla's electric returns Tesla, one of the "Magnificent Seven" group of nology stocks, has duced strong returns for holders
In 2024, the stock gained 62. 5%, easily besting the S&P 500's total return of 25% and the Nasdaq Composite's total return of 29
Tesla's automotive duces most of the company's revenue
In 2024, this fell 6% to $77. 1 billion due in part to lower EV prices
Including services (e. , used vehicles, maintenance services, supercharging, and insurance), the top line from that segment dropped 3% to $87
Its other major revenue source is the energy generation and storage segment, which was a bright spot
That includes selling, leasing, and financing solar energy generation and storage ducts, and it saw a 67% increase in revenue to $10
However, it made up only 10% of Tesla's total revenue
Arguably, Elon Musk's relationship with Donald Trump, both during the campaign and his presidency, ly contributed to the stock price growth last year
But Musk and Trump have had a falling out, and it's difficult to analyze a company's long-term spects based on personal relationships with politicians
The stock has lost 21. 9% this year through July 2, badly lagging the S&P 500, which has gained 6
Additionally, portions of the Republicans' recently passed tax and spending bill would seem to hurt Tesla's spects
The new law eliminates the federal tax credits for electric vehicles and solar energy systems, which makes those ducts more expensive for consumers
Tesla was already facing challenges, including China-based EV giant BYD (BYDD. 84%) (BYDDY -1. 56%), which has been slashing its prices
The fierce competition has negatively affected Tesla's results
Tesla will report its second-quarter results at the end of the month, but its first-quarter automotive revenue dropped by 20% to $14 billion
That results in a total top-line drop of 9%, and its operating income under generally accepted accounting principles (GAAP) fell by 66% to $399 million
Management has already published its second-quarter vehicle dery numbers, which showed that its sales remain under pressure
It dered 384,000 cars in Q2, compared to over 422,000 in the prior-year period
Management has been in new nologies and ducts, the fully autonomous Cybercab, which is scheduled to go into duction next year
There's a potentially large market for such vehicles, and for the robotaxi service Tesla intends to build, but it's one fraught with challenges
The race to autonomous driving has seen a number of false starts from other companies
It's hard to bet against a Musk-run company given the success he's had in his various ventures
However, given the challenges Tesla faces and its high valuation -- it trades today at a price-to-sales ratio of 11. 6 and a price-to-earnings ratio of 173 -- I'd stay away from the stock
And for investors in the Ark Innovation ETF, I wouldn't expect the EV stock to be the biggest positive driver of the fund's future returns
Lawrence Rothman, CFA has no position in any of the stocks mentioned
The Motley Fool has positions in and recommends Tesla
The Motley Fool recommends BYD Company
The Motley Fool has a disclosure policy.
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