Is Tesla’s Stock Price Surge Justified? Here’s What Analyst Gary Black Says
Tesla (TSLA) stock price has skyrocketed 51% year-to-date, outpacing the Nasdaq’s 28% growth. This surge, according to Gary Black, Managing Partner of The Future Fund LLC and a known Tesla bull, can largely be attributed to optimism surrounding Donald Trump’s potential to expedite Tesla’s autonomous driving licensing efforts.
Earnings Growth Not Keeping Pace:
Black raises a crucial question: have Tesla’s adjusted earnings per share (EPS) estimates kept pace with this stock price surge? His answer is a resounding no. Despite the significant jump in share price since the election, Tesla’s FY2025 adjusted EPS estimates have only increased by a modest 1.6%.
This suggests that the market’s exuberance is primarily fueled by P/E expansion, which has jumped from 77x before the election to 114x today. Gary Black acknowledges his bullish stance on Tesla, but expresses caution, emphasizing that "multiple expansions should reflect an acceleration in earnings growth."
Future Catalyst for Growth:
Black anticipates this acceleration could materialize next year. Two key catalysts he points to are:
- Robotaxi Deployment Permits: Securing permits for robotaxi deployment in Texas and California could be a major growth driver for Tesla.
- Full Self-Driving Licensing: Other automakers licensing Tesla’s full self-driving driver assistance software could further boost earnings.
Analyst Sentiment:
Despite Black’s cautious optimism, analysts maintain a "Buy" consensus rating on Tesla stock. While price targets vary, the average price target from Guggenheim, BofA Securities, and Roth MKM sits at $318.33, implying an 18% downside from the current price.
What’s Next for Tesla?
Tesla’s significant stock price increase presents an intriguing question: Is the growth sustainable? Only time will tell whether Tesla can deliver the earnings growth to justify the current valuation.
Stay informed and engage in the conversation. Share your thoughts on Tesla’s future in the comments below!
