'Should Have Sold Our Entire Tesla Position,' Says Gary Black, Following Coordinated Global Price Cuts Over Weekend
Over the weekend, Tesla announced coordinated price cuts for its electric vehicles across different regions. However, this decision did not sit well with a fund manager whose firm holds a position in the stock.
Future Fund was right to reduce its Tesla position from 12.2% in Sep 2022 to 2.7% due to its concern over deteriorating fundamentals, said the firm's co-founder and managing partner, Gary Black, in a post on X on Sat.
"In hindsight we should have sold our entire Tesla position rather than kept a small % of it," he said.
Black also pointed out that he was right about the following:
- Price cuts won't generate much volume growth
- The need for Tesla to start advertising ICE vehicle owners to transition to EVs
- Full-self driving wouldn't reach the L4/L5 autonomy needed to launch robotaxis anytime soon
- The need to prioritize the USD25,000 compact car to compete effectively with Chinese EV makers
On the other hand, the fund manager said he was wrong about the Cybertruck's halo effect for the entire Tesla franchise and thinking that Tesla would realize that its price cuts were a futile effort to lift sales.
In a separate post, Black slammed Tesla bulls who attacked analysts like himself and Ross Gerber for their realistic predictions. Those bulls "want to believe everything at [Tesla] is wonderful despite the 50% collapse in [Tesla] earnings power over the past year,” he said.
Black said he has cut his Tesla earnings estimate and price target to reflect the weekend EV price cuts in the U.S. and China. He noted that the successive price cuts Tesla announced in 2023 did not result in volume growth as competitors matched the cuts.
Black stated that price cuts in North America could cost Tesla up to USD900 million in annual revenue or 20 cents per share in earnings. With the price cuts now extending across different regions, the analyst estimated an annual revenue impact of USD2.7 billion and a 60-cent per share reduction in earnings.
A Reuters report said Tesla has reduced prices of certain EV models in Germany and other European countries.
The fund manager also warned further estimate cuts by Wall Street analysts, most of whom took down their projections in the run-up to Tue's earnings. Analysts, on average, are estimating earnings per share of 51 cents and revenue of USD22.34 billion, according to Benzinga Pro data. This compares to the year-ago's 85 cents per share and USD23.33 billion, respectively.
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