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Welcome back to Yahoo Finance Live. Innovation never stops, even before the long weekend and after the employment report. And this means that new investment opportunities may appear right in front of you. Who better to discuss the intersection of innovation and investing than Katie Wood? She is, of course, the founder, CEO and CIO of ARK Invest and joins us now for an exclusive conversation .
Katie, welcome back to Yahoo Finance. Thank you for taking the time before the long weekend. I wish you could see my notes, because I have several pages of them. But before we get into some of your recent picks and things you've been buying, tell us a little bit about today's employment report. It is published below the grades.
You know, this is the type of report where you as an investor need to take a step back and rethink any strategies you've been using? Well, we believe there are three reasons why the employment report was weaker than expected. One of them is the Delta coronavirus variant. We saw that the leisure and hospitality industry remained unchanged.
There was no employment growth there. This is a big change. We also know that there are supply chain issues at play here. Of course, we hear a lot about this from many sectors of the automotive sector, and we have seen that in manufacturing, the total number of hours worked has decreased by 0.5%. So this suggests some possible supply chain issues, or perhaps some people may be missing the point here.
We believe that inventory is accumulating, but inventory, let's take cars for example, is not on dealership floors. Many people argue that there is a latent weakness developing in the automotive sector , and one of the main reasons we believe this is happening is because the inventory is sitting in our driveways or garages.
Last year we tried to avoid public transportation. So used car sales have skyrocketed , as have new car sales, much stronger than expected. And now, I think, however, there is another reason. And this is what the consumer thinks about their next purchase. Will it be gasoline or electric? And we think electric vehicle sales will grow by more than 50% this year, maybe even more than 50%.
And this is a global figure, while sales of traditional cars are virtually unchanged. It looks like they will grow very little, if at all, on average per year. Katie, so let's focus on the automotive sector. Of course, one of your biggest assets in your funds is Tesla, and you've been holding it for a long time .
Given the chip shortages we're seeing, are you concerned that Tesla won't hit any of its delivery estimates this year? Well, if we understand correctly what's happening with gasoline-powered car sales, I think car manufacturers will cut them, and that will free up some of the chip supply that could have gone to gasoline-powered cars for electric car manufacturers, which are growing dramatically here.
So I was impressed by how Elon Musk and his team were able to overcome the chip shortage, because it applies not only to the most complex chips, but also to microcontrollers. So their ingenuity worked in terms of substitution. We know it's a struggle, but if we're right about what's happening in the traditional automotive sector, the gasoline part of the market, some of those chips will be freed up for electric car manufacturers.
Katie, when you initially made your forecast for Tesla, I believe the target price was $7,000. Actually GM, Ford, Toyota haven't done much in the electric vehicle space, but now that they are doing it, I mean I'm looking forward to electric pickup trucks, it looks pretty cool, I think. Do you know how this affects the long-term growth profile of a company like Tesla ?
Well, I think this confirms it. Ours, according to our estimates, are based on Wright's law, which we can resort to if you like; This is due to Moore's Law: we believe that electric vehicle sales will grow from 2.2 million units last year ( this year looks like there will be 3.6 or 3.8) to 40 million in 2025, as electric vehicle prices fall below those of gasoline-powered cars on an equivalent basis.
And we were concerned about that 40 million number, that other car manufacturers weren't responding quickly enough. What has happened is that China, which pays a lot of attention to the environment, is aggressively subsidizing electric vehicles. And so the supply begins to grow. So no, we think this is good news.
This confirms this massive shift away from internal combustion engines and gasoline-powered cars. Over the last few years, we've sold 80 to 90 million of them a year to electric vehicles, which, as I said, are now off such a low baseline: 2.2 last year, maybe 3.6 or 3.8 this year, all the way up to 40 million.
I think it just tells us that the exponential growth trajectory is in place, and given the way China subsidizes, we can be conservative. Wow, interesting, and just to stay on that, Katie, it's been an impressive year for Tesla, several quarters of profit in the US business are booming, there's good business in China.
Are you saying that do you see a fair value for Tesla above 7,000 given the year they've had? So, the original number was for the old shares . We had a five-to-one stock split. So our new number, our base case for Tesla with this stock split is 3,000. Uh, the shares are now a little over 700. On the old basis, it would have been 15,000.
So what that tells you, uh, is that our estimate of Tesla's at their market share, instead of declining from 2000, uh , in 2017 to today, has actually gone up pretty dramatically around the world. Interesting. Katie, before we quickly move on to the conversation, I want to ask you about one more name.
Actually, a few more, but one right here, Zoom. If I remember correctly, you were in the market buying Zoom stock this week after the earnings report looked good. I think some investors were concerned about the slowdown. What did they miss, and what do you see? Yes. So, we believe that a transformation is taking place in the communications sector .
Many people think of Zoom as nothing more than these video sessions we're currently participating in, but it's becoming much more than that. We believe that together with Zoom Phone, it will take over the PBX system. In other words, it will start to occupy a larger share of the communication stack in technology.
Enterprise communications is a $1.5 trillion opportunity, and we believe Zoom is on track to usurp the role of players like Cisco in the coming years. So this is a very big story. It's not just about video and staying at home or even hybrid technologies. Uh, it's much more. You know, Katie, part of it is also a play on the theme that we're probably going to be in this hybrid work model for 5 years, the next decade, who knows ?
And you know what? We may see more pandemics. Is this part of the Zoom game? Um, yeah, but I really think that, uh, they're spreading their wings in the communications equipment space, uh, which, as I just mentioned, is the biggest, uh, part of the, uh, 1.5 trillion technology stack. Uh, we think they're looking for that, and that, uh, one of the reasons they intervened is because of what happened during the coronavirus.
It was the most effective communication tool that any of us had. I know I much prefer, uh, knowing that my next call will be on Zoom as opposed to one of the previous players because it just works better and the user interface is much better too. So , they've interfered with the communications equipment in this way, and now they're just going to move forward very dramatically, we think, from there.
I love Zoom. Believe it or not, Katie, I've already figured out how to use it on my phone. But wait with us. You have kindly agreed to stay with us for another block. We'll be back soon with more from Katie Wood on Yahoo Finance.
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