Tesla Stock Slumps: What Will It Take for Gary Black’s Future Fund to Boost Its Position?
Tesla, Inc. TSLA shares faced a downward slide last week, erasing gains seen after the company’s quarterly deliveries report. While some investors are bullish, the recent dip has sparked questions about what it will take to reignite investor confidence. One notable voice in the market, Gary Black, founder of The Future Fund LLC, offered a glimpse into his investment strategy regarding the electric vehicle giant.
Key Takeaways:
- Tesla Stock Takes a Hit: Despite a positive earnings report, Tesla stock saw a decline of over 8% in the week ending July 26.
- A Cautious Investor: Gary Black, CEO of The Future Fund LLC, has reduced his firm’s Tesla stake from over 5% to 3.55%, raising questions about his future plans.
- Renewed Bullishness: Black outlined three key factors that would prompt him to increase his Tesla position:
- Auto Gross Margin Stabilization: Seeing a consistent path to stabilizing and increasing auto gross margins is crucial.
- Volume Growth Revival: Evidence confirming a return of Tesla’s volume growth to 25% or more, driven by sub-$30K EV launches to expand its market reach, is vital.
- Self-Driving Advancements: Data demonstrating a significant boost in Tesla’s full self-driving (FSD) technology’s efficacy from its current 95%-96% to 99.99% would support a price target increase to $270.
The Uncertain Path Ahead:
Despite the impressive quarterly deliveries report and a bullish outlook for the future, the recent stock dip highlights underlying concerns about Tesla’s path forward. Here’s a breakdown of some factors impacting investor sentiment:
Uncertainties and Headwinds:
- Regulatory Credit Dependencies: Concerns are growing regarding the heavy reliance on regulatory credits for Tesla’s operating profits. These credits, being one-time in nature, raise doubts about the long-term sustainability of profitability.
- Volume Outlook: The company’s guidance for a significant volume decline in 2024 further fueled investor worries, prompting many to question Tesla’s ability to sustain growth in the coming years.
- Political Winds: The potential for a change in the White House, particularly with Republican nominee Donald Trump’s anti-EV stance looming, presents a major risk for Tesla’s future.
Potential Catalysts:
- RoboTaxi Debut: The much-anticipated robotaxi unveiling event scheduled for October 10th could be a pivotal moment for Tesla. Positive news and advancements in the technology could significantly boost the stock.
- Upcoming Announcements: The event could also bring other significant announcements that could reshape Tesla’s trajectory and re-energize investor confidence.
Navigating the Turbulence:
While the recent stock decline may signal a period of consolidation, Tesla’s future remains uncertain. Meeting Black’s set of criteria, including achieving stability in auto gross margins, reviving volume growth, and making substantial advancements with its FSD technology, will be crucial for the company to regain investor confidence and push for higher valuations.
However, the lingering uncertainties around its profitability, future volume growth, and the potential political shifts cast a shadow of concern over the stock’s short-term trajectory. Only time will tell whether these headwinds can be overcome and if Tesla can truly solidify its position as a dominant force in the electric vehicle market.
