Cathie Wood posing with a Tesla car
Source: Cathie Wood Twitter

Why Cathie Wood’s ARK Invest Is Selling Tesla Stock

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Sep. 29 2021, Published 12:04 p.m. ET

Cathie Wood of ARK Invest, among the biggest Tesla (TSLA) bulls, has been selling TSLA stock in Sep. 2021. The move has baffled some, given her high target price for the stock. Why is Wood selling Tesla?

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In Apr. 2021, Wood also sold Tesla shares, and bought Coinbase stock. Likewise, in Sep. 2021, has been selling Tesla and buying Coinbase, Robinhood. and Square stock. Tesla and Square are long-time Wood favorites, and she identified both multibaggers early.

Why is Wood selling Tesla surprising?

Wood's 2025 target price for Tesla is $3,000, almost four times its current price. Her bear-case target is $1,500, while her bull-case target is $4,000. In Sep. 2021, Wood said that she would sell Tesla stock if it hits $3,000. The stock is still way off that target.

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Why is Cathie Wood selling Tesla stock?

Typically, Wood sells stakes when they exceed 10 percent of their portfolio. Tesla has outperformed other growth stocks over the last month, giving it a higher weightage in some of ARK ETFs. The stock sale seems aimed at rebalancing the portfolio.

Also, since a lot of other growth stocks owned by ARK have fallen significantly, Wood might use the proceeds from the sale of Tesla stock to buy more shares of beaten-down growth names that ARK already holds.

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Another aspect worth considering would be that sometime next week, Tesla is reporting its third-quarter deliveries. The automotive industry, which includes both legacy and pure-play EV companies, has been grappling with a severe chip shortage.

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Tesla's third-quarter deliveries

Current estimates suggest that Tesla might set another delivery record in the third quarter. However, both NIO and Li Auto have had to lower their third-quarter delivery guidance amid the chip shortage, and Tesla CEO Elon Musk has admitted to bottlenecks due to the situation.

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The global container shortage may also have impacted the company’s third-quarter deliveries. Tesla produces cars in its Fremont and Shanghai Gigafactories and ships them to other countries. The company’s Berlin Gigafactory is expected to soon come online, which could help manage the logistics and supply chain in Europe.

Despite the recent sale, Tesla is still the largest holding in ARK’s flagship ARK Innovation ETF (ARKK) and the biggest overall holding for the group. Markets don’t seem too perturbed by Wood selling $270 million of TSLA, and the stock was trading higher on Sep. 29.

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