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.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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