Ladies and gentleman, shorts and longs, investors of all industries, step right up and prepare yourselves for a tale of great financial speculation. Tesla's valuation has been a topic of great debate over the past several months, and its stock the focus of many. Both individuals and large investment firms alike are looking to capitalize on the automaker's bleeding-edge approach to the automotive industry, some for the personal belief of Tesla's mission, and other for the potential bullish market opportunity of a lifetime. Tesla has entered peak fear, uncertainty, and doubt (FUD) season, partly due to its sharp rise in popularity over the past several years. Its most recent claim to fame is the automaker's premium midsize sedan, the Model 3, which has not only outsold all other vehicles in its class last fiscal quarter but is doing so while being powered by a battery. But despite the nay-sayers spreading the FUD and short-sellers potentially manipulating the market, another large threat that is often overlooked is overconfidence. Let's sit back as armchair economists and critically evaluate if the industry is ready to support a huge jump in Tesla's market cap. The Claim Back in February, the Chief Investment Officer of ARK Invest, Catherine Wood, announced her organization's price targets for Tesla's stock. ARK's claim was that Tesla's shares could likely approach an all-time high (ATH) well above what the market has seen throughout the company's existence: $4,000. While it's normal for any successful company to grow and appreciate in value, even Tesla's CEO Elon Musk noted that the company's stock was higher than deserved, and that was only last year. Months of silence followed until Musk announced on Twitter that he had a potential plan to take the company private at $420 per share, an action which ultimately sparked an SEC investigation amid a rash of both support and opposition from shareholders. This prompted Wood to publish an open letter to dissuade Musk & Co. from privatizing Tesla, providing valuation predictions to substantiate the company's claims. Wood has maintained the position that ARK foresees Tesla's shares reaching as high as $4,000 in the next five years should a bullish market help to push the currently profitless company over the edge of financial clemency with its investors. This, of course, is the company's best case scenario according to ARK. The same timeframe's conservative bear market target is $700, leaving investors with quite a speculative range, though undoubtedly a significant gain prediction nevertheless. The Market To put these claims into perspective, ARK's $4,000 per share best-case scenario target would be nearly a 1,200 percent valuation increase, a number similar to the Bitcoin bubble of 2017 (which ARK had purchased, reportedly under $250). This would value Tesla's market cap at almost $700 billion, or well over three times that of Toyota. As of May 2018, the total value of the ten largest automakers in the world account for around $756 billion; if these numbers were to theoretically remain static (less ARK's best-case projection), Tesla's market cap would account for 49.7 percent of the top ten automaker's wealth combined, and place the company as the U.S.'s fifth highest ranking for market cap.

via The Drive This is how $700 billion in valuation stacks up against the "big ten"

ARK projects that a portion of this wealth will be accumulated as the automaker gains the functionality to produce and deliver more vehicles as it grows. The firm believes that the annual sales of Tesla's vehicles will increase from almost 127,000 units per year to 1.6 million units, raising its annual vehicle-based revenue from $13.7 billion to $81.6 billion and boosting its gross margin to the highest in the industry, 30 percent, presumably thanks to better economies of scale.

data via YCharts Current Quarterly Gross Margin by Manufacturer