FYI: The Future Fund’s Exit from Tesla Highlights Concerns Over Valuation and Growth Projections
In a significant shift, Gary Black, an analyst with The Future Fund, recently announced the complete divestment of the firm’s Tesla shares for the first time since 2021. This decision sheds light on some of the firm’s concerns about the electric vehicle giant’s current valuation and future prospects.
Key Areas of Concern
Valuation and Price Target
The Future Fund sold its Tesla holdings at $358 per share, maintaining a price target of $310. Black’s forecast anticipates 2030 Tesla sales volumes of 5.4 million and an adjusted EPS of $12, suggesting the current valuation is overly ambitious.
Price-to-Earnings (P/E) Ratio Challenges
A primary concern for Black is Tesla’s sky-high P/E ratio. Currently, Tesla trades at a 2025 P/E of 188x, as earnings forecasts have continually been revised downward. This shift is attributed to weaker-than-expected deliveries, with Black predicting a 12% drop in quarterly deliveries and a 10% decline annually, compared to Wall Street’s slightly more optimistic estimates.
Skepticism on Tesla’s Robotaxi Ambitions
Black expresses caution about Tesla’s robotaxi project, particularly the current trials in Austin. Despite broader industry optimism about Tesla’s strides in self-driving technology, Black believes the risk-reward ratio is not in favor of investors.
Doubts Over Affordable Models
The introduction of more budget-friendly Tesla models brings additional questions. Black fears these models might simply be less equipped versions of existing ones, like the Model Y, rather than innovative new offerings that expand Tesla’s total addressable market. Despite the Model Y’s popularity as the top-selling global vehicle, there’s skepticism about whether price reductions will lead to significant market expansion.
Conclusion
The Future Fund’s decision to exit its Tesla position highlights critical concerns about the company’s valuation and growth strategies. While Tesla remains a leader in the electric vehicle market, challenges persist in aligning investor expectations with actual financial performance. As the automotive landscape evolves, Tesla’s ability to innovate and adapt will be essential in maintaining its competitive edge.
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William Kouch, Editor of Automotive.fyi
