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Can Tesla really quadruple its share price to $3,000 by 2025 to become the most valuable, biggest-earning enterprise on the planet––headed by the richest person? And not just achieve all those superlatives, but zoom at a speed that leaves Amazon, Apple, and Microsoft far behind, and puts Elon Musk so many laps ahead of the Gateses, Bezoses, and Buffetts that they’ll have to race to catch him and probably won’t?

In effect, that’s the new prediction from ARK Invest, the firm headed by longtime Tesla enthusiast Cathie Wood and whose funds hold over $3.2 billion in the EV-maker’s shares. In a March 19 post on the ARK home page, analyst Tasha Keeney wrote that ARK is raising its already head-spinning estimate that Tesla would hit $1,400 a share in 2024 to a new target of $3,000 by 2025. Investors took the projection to heart, lifting its shares 6.2% or to $698, or by $41 billion at midday on Monday. ARK expects Tesla to soar more than fourfold from there over the next four years and nine months. If that happens, its market cap would reach $3 trillion, assuming its count of shares outstanding remains around today’s levels.

Keeney’s report is well written and presents a detailed road map showing how Tesla can get there. The predictions are based on a Monte Carlo model; ARK used 34 inputs to generate 40,000 possible outcomes. Result: The probabilities generated by those simulations gave Tesla a one-fourth chance of hitting $1,500 by 2025 in the bear case, one-fourth odds of reaching $4,000 in the bull scenario, and pegs its most likely price five years hence at $3,000. It’s interesting that the least optimistic of the three forecasts has Tesla more than doubling, or rising at an annual rate of 18%, through the close of 2025.

The ARK take merits a close reading, in part because it exerts such a strong influence on investors.

The fundamentals

“It’s a big leap of faith,” says Jack Ciesielski, one of the nation’s top accounting experts. Ciesielski notes that ARK isn’t making its case based on the fundamentals usually deployed to value stocks: “They’re not thinking about Tesla in traditional ways. When Warren Buffett talked about Coca-Cola way back, he’d cite that they sold a little more soda and raised prices every year, both at a predictable rate. The foundation of predicting the stock price was the discounted present value of those predictable cash flows.” Those cash flow forecasts had a high degree of certainty and were an excellent guide to where Coke’s shares were heading. If Coke’s price dropped way below the present value of its reliable stream of cash flows to come, investors would pounce, and send its price back to fair value.

Ciesielski isn’t faulting ARK for its methods. “When you have a company where the future is this uncertain, you have to do it the way ARK did,” he says. “You have to guess on the most likely inputs and put up boundaries around those guesses.” But crunching a bunch of educated guesses in a mathematical model doesn’t necessarily generate an outcome that’s a lot better than a result based on traditional analysis, such how fast the auto industry will grow in the future, and how much of that growth Tesla is likely to capture. “One thing I don’t see in this analysis,” says Ciesielski, “is the competitive picture.”

He makes a good point. Sundry competitors are invading the space Tesla now dominates. By 2025, Volkswagen pledges to spend $85 billion developing EVs, and Ford and GM are investing $30 billion combined in electrification. BMW is targeting as much as one-quarter of its sales in the fast-expanding category by the same time ARK expects Tesla to hit $3,000, and Honda promises to make two-thirds of its fleet electric by 2030.

The competition

Based on today’s projections for future car sales, it sure doesn’t seem possible. Last year, global sales of light passenger vehicles, chiefly sedans and SUVs, stood at 73 million units, which brought manufacturers $2.03 trillion in revenue, according to research firm IHS. It estimates that volumes will reach 93 million cars and SUVs in 2025, and that sales will register $2.57 trillion.

ARK doesn’t give a precise prediction for Tesla’s unit sales for that year. But we can surmise from its “bull case” of 10 million that the number is around 9 million. Last year, it sold 500,000 cars. So new Teslas on the road would need to account for 8.5 million of the projected 10 million unit increase worldwide by 2025. Will GM, Toyota, and VW stand by while Tesla devours 85% of the sales increase over the next half-decade?

The picture is similar for revenues. Last year, Tesla generated $29.54 billion from auto sales. (By the way, ARK isn’t counting contributions from its battery and solar businesses.) Five years from now, it’s expecting a moonshot to $507 billion, meaning an increase of $477 billion. Winning the trophy would require taking 88% of the total $540 billion projected gain for the worldwide market.

“What happens if those legacy manufacturers all cut prices to win share?” says Ciesielski. “That could disrupt those forecasts by forcing Tesla to cut its prices as well.” Also, Tesla will need to go much more heavily into cheaper mass-market cars to come anywhere near that volume of production. Going down-market means a loss of cachet. That could hammer the gigantic margins Tesla needs to hit the ARK targets. “When everybody drives a Tesla, how special is it?” asks Ciesielski.

The ARK manifesto, however, contains a daring prophecy: Chances are excellent we’ll see autonomous vehicles on the road in five years. “In our last valuation model,” the report states, “ARK assumed that Tesla had a 30% chance of delivering full autonomous vehicles by 2024. Now, ARK estimates that the probability is 50% by 2025.” Will the advent of robo-taxis make the overall market much bigger than expected in five years, and give Tesla the opening to expand far faster than any competitor because it will be making most or all of the self-driving vehicles?

That appears to be ARK’s prediction. It sees robo-taxis accounting for around $80 billion or 45% of Tesla’s revenues in 2025, up from zero last year. Once again, it gives a one-half chance the “autonomous ride-hail” cars won’t get here by 2025. That’s the problem posed by relying on intelligent guesswork versus basics that are a lot more predictable.

The scale

A key question naturally arises. Is ARK predicting that investors will award Tesla a gigantic price-to-earnings multiple in five years? The larger that P/E, the less spectacularly its earnings would need to grow. On the other hand, a big multiple means that only years of supercharged expansion after 2025 could justify a market cap of $3 trillion.

As it turns out, it’s the profit number that’s Brobdingnagian, not the multiple. In the ARK model, Tesla grows revenues from last year’s $29.54 billion to $507 billion by 2025, a 17-fold increase requiring annual gains of 77%. Its forecast that Ebitda will jump from the $6 billion range in 2020 to $176 billion––that’s not a typo––is similarly Herculean, requiring yearly gains of 95%.

Fortune ran some numbers translating that $176 billion in Ebitda into probable GAAP net earnings. I’ll spare the details, but a reasonable estimate is $128 billion. At a $3 trillion valuation, its P/E five years from now would stand at 23. That number sounds eminently reasonable. What sounds outrageous is the projection for earnings, on which the $3 trillion market cap forecast depends.

To achieve nearly $128 billion in GAAP profits by the end of 2025, Tesla would almost certainly be generating the highest profit total of any enterprise ever in the private sector, by a long shot. Last year, Apple was America’s biggest profit spinner at $58 billion. If ARK is right, Tesla’s profits in less than five years would exceed what Apple and Microsoft garner today, combined. Even if Apple’s earnings wax at a lofty 10% a year, Tesla’s $128 billion in 2025 would beat the iPhone colossus by $30 billion. Likewise, Tesla at $3 trillion would be worth almost double Amazon’s current market cap, and beat Apple’s by 44%.

The problem is twofold. First, it’s highly unlikely that Tesla can devour the required 80%-plus of all growth in the global car market. Second, reaching the $128 billion mark requires an after-tax, GAAP return of sales of 25%. That is not a number known to the modern auto industry. In pre-pandemic 2019, Volkswagen generated a 6% return on sales, and Toyota notched 7%.

Tesla at $3 trillion

In mid-January, Musk briefly surpassed Amazon’s Jeff Bezos to rank as the world’s richest person, at a net worth of $183 billion. He then lost the top spot when Tesla’s shares cratered in February. Musk owns 190 million Tesla shares outright, and has options on another 101 million, about half of which have already vested. Of course, if ARK is correct, he’ll pocket every one of those shares in a walk. At $3,000, Musk’s 291 million shares plus options, less the $7 billion paid to buy the shares underlying the options at the incredible strike price of $70, will total around $870 billion.

It’s hard to see how any of his 12-figure rivals catch up. Since Musk has already beaten most of the goals in his last package way faster than the board ever imagined, he’ll probably get a new grant with higher targets. ARK is effectively saying he’ll beat all of them. Its predictions rely on many, many good things happening for Tesla, most of which are impossible to call with any degree of certainty. But if all those unknowns play out, Elon Musk could become the world’s first trillion-dollar man.