Gary Black, managing partner at The Future Fund, shared his outlook on Tesla Inc TSLA, stressing that "many TSLA investors still conflate valuation and stock price."
What Happened: In response to Tesla's electric vehicle price cuts in October 2022, The Future Fund reduced its Tesla earnings estimates and price target, expecting minimal volume growth.
Black noted, "We cut our TSLA position from 12.2% in Oct 2022 to ~4%," a decision validated as Wall Street's 2024 earnings per share estimate for Tesla fell 60% over the past two years, pulling down valuations and stock price.
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Looking ahead, Black sees an opportunity as Tesla prepares to launch a compact EV priced between $25,000 and $30,000, aimed at boosting its total addressable market.
"Analysts are again starting to increase TSLA EPS estimates," he explained, a trend he believes will positively impact Tesla's valuation and stock price.
Contrary to popular assumptions, Black emphasized that his price target "changes as our fundamental outlook changes," not based on stock price movements. As Tesla's gross margins stabilize, Black anticipates a stock rebound, predicting that as "TSLA earnings estimates continue to recover," the stock price should follow suit.
“We expect [Tesla] stock to continue to recover as TSLA earnings [estimates] continue to recover,” Black wrote.
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Why It Matters: Black’s comments come at a time when Tesla is making significant strides in its autonomous driving technology. Despite initially dismissing the need for Lidar, the company is now reportedly considering its use.
Additionally, Tesla’s plans to expand its ‘Actually Smart Summon’ feature beyond the U.S. and its cost-efficient Cybercab production are indicative of the company’s commitment to innovation and growth.
Despite these advancements, Tesla has faced stiff competition from Chinese EV giant BYD, which recently outperformed Tesla in quarterly revenue for the first time since 2022. This has raised questions about Tesla’s ability to maintain its market dominance in the face of increasing competition.
Price Action: Tesla Inc.’s stock closed at $248.98 on Friday, down 0.35% for the day. In after-hours trading, the stock edged up by 0.16%. Year-to-date, Tesla shares have increased by 0.23%, according to data from Benzinga Pro.
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