Investment guru predicts ‘degrade' in Tesla stock growth; Here's why

The Future Fund exited its position in Tesla (TSLA), citing concerns over the company's stretched valuation and declining growth prospects, with Managing Partner Gary Black highlighting Tesla's forward P/E ratio of 180x based on projected 2025 earnings as unsustainable for a trillion-dollar company. Black anticipates a slowdown in Tesla's growth as emerging technologies like Robotaxis and Optimus are integrated, and notes that Wall Street has recently slashed Tesla’s earnings estimates for 2026 and 2028 by 25 to 40%. Tesla's stock closed down over 3% at $346.46, and is down nearly 9% year-to-date.

Analysis

The Future Fund's recent decision to exit its entire position in Tesla (NASDAQ: TSLA) underscores growing concerns regarding the electric vehicle manufacturer's valuation and future growth trajectory. Gary Black, Managing Partner at The Future Fund, highlighted Tesla's forward price-to-earnings (P/E) ratio of 180x based on projected 2025 earnings as a primary concern, deeming it unsustainable for a company of Tesla's scale. This valuation appears stretched when considering the projected P/E ratios of 120x for 2026 and 45x for 2029. Black anticipates a deceleration in Tesla's growth rate as emerging technologies like Robotaxis and the Optimus humanoid robot become integrated into the company's baseline operations, arguing that the current stock valuation has already priced in an optimistic outlook. Compounding these concerns, Wall Street analysts have significantly reduced Tesla's earnings estimates for 2026 and 2028 by 25% to 40%, reflecting skepticism about the core EV business. The stock has reflected this sentiment, closing down over 3% at $346.46 in its most recent session and exhibiting a nearly 9% decline year-to-date. While Tesla faces challenges such as declining sales and controversies surrounding its CEO, some observers note potential positive catalysts, such as Elon Musk's departure from a government advisory role.

Key Decisions for Investors

• Investors should critically assess Tesla's high forward P/E multiples against the backdrop of decelerating growth projections and recent downward revisions in earnings estimates.
• Carefully monitor the progress and timeline for the integration of new ventures like Robotaxis and Optimus, as their inclusion in future revenue and profit forecasts is a key factor influencing long-term valuation perspectives.
• Consider the heightened risk profile associated with Tesla, given the confluence of valuation concerns, reduced growth expectations from analysts, and recent stock underperformance, before making new or adjusting existing investment allocations.