Tesla Inc.‘s TSLA shares fell 6% Tuesday as part of a broader market rebalancing of stocks that have rallied on President-elect Donald Trump’s campaign momentum, with The Future Fund LLC, Managing Partner Gary Black providing analysis of the move and valuation concerns.
What Happened: The decline comes as hedge funds rebalance positions after Tesla shares surged 36% since November, significantly outpacing the Nasdaq 100’s 4% gain during the same period. Black noted that Tesla’s forward earnings estimates have remained largely unchanged, with fiscal year 2025 and 2029 projections increasing by less than 1%.
“Many hedge funds with big gains will rebalance positions when a position size gets out of whack with model allocations,” Black wrote on X, formerly Twitter. He emphasized that while having a supportive president could streamline robotaxi deployment approvals, it wouldn’t necessarily improve Tesla’s Full Self-Driving technology capabilities.
The stock’s current valuation of 104 times projected 2025 earnings puts pressure on Tesla to meet CEO Elon Musk‘s guidance of 20-30% volume growth in fiscal year 2025. This multiple significantly exceeds Tesla’s three-year average forward price-to-earnings ratio of 55.
Black remains optimistic about Tesla’s growth targets, citing the planned launch of a $25,000-$30,000 vehicle in the first half of 2025. “We see FY’25 delivery growth of 20-30% as achievable assuming the new vehicle expands Tesla’s total addressable market to the compact category,” he stated.
Why It Matters: The analysis comes amid broader developments for Tesla, including Musk’s new role in the Trump administration. Trump announced plans to appoint Musk to lead a new Department of Government Efficiency, aimed at streamlining federal operations.
Tesla’s immediate focus remains on fourth-quarter deliveries, with the company needing to deliver at least 514,926 vehicles to surpass its 2023 total of 1.81 million units.
Despite current market pressures, the stock has maintained a 63% gain since October’s earnings report, supported by delivery expansion and autonomous driving technology prospects.
Price Action: Tesla’s stock closed at $328.64 on Tuesday, down 6.10% for the day. In after-hours trading, the stock dipped a further 1.02%. Year to date, Tesla’s stock has surged by 32.29%, according to data from Benzinga Pro.
Read Next:
Image Via Unsplash
Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.