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On Wednesday, Gary Black, the Managing Partner at The Future Fund LLC, announced the sale of his remaining Tesla (NASDAQ:TSLA) shares, marking the first time since 2021 that he has not held a position in the electric vehicle giant. Black cited a disconnect between Tesla’s valuation and its underlying fundamentals as the primary reason for the sale.
Black expressed concerns over Tesla’s current price-to-earnings (P/E) ratio for the year 2025, which stands at 188 times, noting that earnings estimates have continued to decrease, with a 5% drop in the past week and a 40% drop year-to-date (YTD). He pointed to weak YTD deliveries, including disappointing results for April, as a contributing factor to his decision. According to his analysis, second quarter and full-year 2025 Tesla deliveries are projected to decline by 12% and 10% year-over-year, respectively, which is more pessimistic than Wall Street estimates of 7% and 5% declines.
Black also mentioned concerns about the potential downside risks associated with Tesla’s robotaxi tests in Austin and the upcoming release of a more affordable vehicle in July. He suggested that this new model might be a lower-priced, stripped-down version of the Model Y, rather than a new design that could expand the total addressable market (TAM). This could lead to further reductions in fiscal year 2025 estimates, potentially mirroring the pattern seen in 2023-2024 when Tesla lowered electric vehicle prices to support volume growth.
Despite selling his Tesla stock, Black maintained a 6-12 month price target (PT) of $310 for the company’s shares. This target is based on his forecast of 5.4 million Tesla volumes and an adjusted earnings per share (EPS) of $12.00 by the year 2030. Applying a 2x price/earnings-to-growth (PEG) ratio to an expected EPS growth rate of 25% from 2030 to 2040, he arrives at a 2030 valuation of $600. After discounting back to the present at a 14.2% cost of equity, Black’s calculations lead to the current price target of $310.
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