Despite Wednesday's inflation data-induced pullback, $Tesla (TSLA.US)$ shares are showing signs of recovery from the sell-off triggered by rumors of shelving the Model 2 car, with much of the negative fundamentals already factored into the stock, according to Future Fund Managing Partner Gary Black.
What Happened: Black described Tesla's current state as a "tug-of-war between declining fundamentals" and "excitement about FSD 12.3.x and robotaxi timing," in a post on X.
He highlighted that the fiscal year 2024 earnings per share estimates have declined by 26% this year, from $3.38 to $2.84, and that for 2025 have fallen by 29% from $5.34 to $3.80.
Black emphasized the significance of CEO Elon Musk's statements regarding the timing of the $25,000 low-end car launch during the first-quarter earnings call on April 23.
"Ideally, Elon should say TSLA continues to focus on both the $25K compact and robotaxi as a single platform (the latter without pedals and steering wheel) without providing explicit timing," he suggested, to avoid triggering the Osborne Effect.
The Osborne effect refers to customers canceling their orders in anticipation of an imminent new model launch.
Black noted that if Musk does provide timing, a 2026 launch of the $25,000 compact car may not disappoint investors as they have already factored in the timeframe.
Stock Implications: Black identified the potential risk of new configurator price cuts as the biggest concern for Tesla, given the high Model Y inventory levels. He expects Tesla to guide to flat year-over-year delivery growth for 2024, translating to a volume of 1.8 million units. Black suggested that this expectation may already be reflected in the stock, as top analysts have all forecasted flattish growth following the first-quarter deliveries miss.
"This gives mgmt cover to bring FY'24 volume expectations down from the current level of 1,958K (+8% YoY)," Black explained. However, he stressed that the year-to-decline in 2024 and 2025 earnings estimates must cease for Tesla's stock to move higher, adding that much of the negative fundamentals news may already be priced in.
Tesla shares ended Wednesday's session down 2.89% at $171.76, and fell an incremental 0.38% in premarket trading on Thursday, according to Benzinga Pro data.