FYI: The Future Fund liquidates its Tesla holdings, examining fundamental concerns with the automaker’s outlook.
Tesla Analyst Sells Entire Stake: A Strategic Move
William Kouch, Editor of Automotive.fyi
The Future Fund, headed by Tesla analyst Gary Black, made headlines today by divesting its entire position in Tesla (TSLA) stock. This marks a significant strategic shift for the firm, which had maintained a stake in the electric vehicle giant since 2021. Black’s decision stems from a variety of critical assessments concerning Tesla’s future growth potential and market valuation.
Fundamentals, Not Aligned
Black asserts that the firm sold its Tesla shares at $358 each, even as their price target stands at $310. His projection hinges on Tesla achieving 5.4 million in volume and an adjusted earnings per share of $12 by 2030. This choice underscores a belief that Tesla’s current valuation is overly speculative regarding its underlying business fundamentals.
Concerns Over P/E Ratio
Central to Black’s caution is Tesla’s price-to-earnings (P/E) ratio. Currently, Tesla trades at a projected 2025 P/E ratio of 188x, a figure that appears unsustainable to Black as downward earnings revisions persist. Year-to-date deliveries have been lackluster, adding pressure on the stock’s multiple. The Future Fund anticipates a 12% drop in quarterly deliveries, surpassing Wall Street’s prediction of a 7% decrease for Q2 and a 5% annual decline.
Skepticism Surrounding Robotaxis
The much-anticipated robotaxi initiative from Tesla has met with skepticism from Black, who questions its risk-to-reward ratio. Despite expectations that Tesla’s self-driving capabilities could outpace competitors, Black remains cautious, describing the Austin robotaxi test as potentially offering more downside than upside.
Affordable Models – A Doubtful Expansion
Black raises doubts about Tesla’s strategy of rolling out lower-cost models. He anticipates a possibly trimmed-down Model Y, purposed to economize rather than expand the market footprint. Contrarily, supporters argue this could broaden Tesla’s total addressable market, given the Model Y’s leading sales performance.
Future Expectations
Introducing a lower-cost vehicle, even if it lacks some features, might still outperform standard internal combustion engine vehicles. The potential success of these models hinges on Tesla’s Full Self-Driving technology, which offers significant added value.
However, Black warns that Tesla might replicate its 2023-2024 scenario, where price cuts didn’t substantially boost volume, affecting future fiscal estimates for 2025.
Summing Up
The Future Fund’s bold decision to exit Tesla highlights ongoing concerns about valuation and deliverable growth. As the EV giant faces critical challenges in maintaining its momentum, industry-watchers and investors alike should keep a close eye on its strategic pivots.
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This move by The Future Fund calls attention to the intricacies involved in navigating Tesla’s evolving landscape. Investors and enthusiasts must dissect these considerations as Tesla continues to redefine the automotive industry.
