Tesla stock seen hitting record high despite earnings cut - Gary Black

On Wednesday, Gary Black of the The Future Fund LLC projected that Tesla Inc. (NASDAQ:TSLA ) could surpass its all-time high stock price of $410, recorded in November 2021, potentially even today. This anticipated milestone comes despite a significant decrease in the adjusted earnings estimates for Tesla in fiscal year 2024, which have been reduced by 63% since 2022. Currently, Tesla's price-to-earnings (P/E) ratio for 2025 stands at 122 times, which remains lower than the forward one-year P/E ratio of 145 times from November 2021.

The Future Fund LLC highlighted that Tesla's previous peak was driven by expectations of a 50% growth in volume, bolstered by the surge in global electric vehicle (EV) adoption and the popularity of the Model Y. However, CEO Elon Musk's current forecast for fiscal year 2025 predicts a volume growth of only 20-30%, a substantial decline from prior expectations. Despite this, Tesla's stock performance has nearly recovered from its underperformance over the past three years, now showing a 24% increase compared to the NASDAQ's 33% in the same period.

The firm's optimism for Tesla's future is also based on the anticipation of a new Model 3 hatchback launch in the first half of 2025. This new vehicle is expected to expand Tesla's total addressable market (TAM) into the global compact car category, which could secure a 12-15% market share. The Future Fund's delivery and adjusted earnings per share (EPS) estimates for Tesla in fiscal year 2025 are significantly higher than Wall Street's estimates, forecasting a 28% year-over-year growth in deliveries compared to Wall Street's 15%.

The Future Fund LLC's adjusted EPS forecast for Tesla in fiscal year 2025 is $3.80, which is 15% higher than the Wall Street consensus of $3.29. The firm draws parallels to the situation in 2020 when the introduction of the Model Y was seen as an extension into the crossover utility vehicle (CUV) segment, a perspective that many on Wall Street failed to share at the time. The Future Fund sees a similar pattern of underestimation occurring with the upcoming Tesla Compact model for 2025.

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Source: Investing.com