As Tesla, Inc. TSLA shares closed above the $250 mark for the first time in approximately a month, Gary Black, Managing Partner of Future Fund, presented a bullish case for the company, emphasizing its attractiveness as an investment amid a reduction in EV investments by legacy automakers.
What Happened: According to Black, Tesla stands out as “increasingly the only investable EV play” as other automakers scale back their EV commitments. The reports of Ford Motor Co. F planning to cut production of its F-150 Lightning pickup truck added weight to Black’s argument.
Black evaluated Tesla’s relative valuation, stating that at the closing price on Thursday, the stock trades at 58 times his 2024 adjusted earnings per share estimate. He considers this valuation to be inexpensive given the expected 28% growth in volume and 32% growth in earnings per share by 2030.
Highlighting the price-earnings growth ratio (PEG) as an essential profitability metric, Black compared Tesla’s PEG of 1.8 times to Apple’s three times, noting that a PEG ratio below 1 is typically seen as favorable.
The analyst pointed out that Thursday’s strength in Tesla’s stock can be attributed to the anticipation of falling interest rates, which he views as a double positive for the company. He expects that as long-term rates decline, high P/E growth names like Tesla will benefit the most.
See Also: Best Electric Vehicle Stocks
Multiple Levers In Play: Black sees Tesla benefiting from a host of positive catalysts going forward. He expects the global EV adoption to accelerate from 13% currently to 60% by 2030, growing at a 24% compounded annual growth rate.
Tesla’s global EV share will likely increase from 16% currently to 20% by 2030, thanks to the Cybertruck and the $25,000 next-gen vehicle, the analyst said. This would mean, the EV giant’s volume will jumpstart from 1.8 million units in 2023 to 2.4 million units in 2024, increasing further to 10.2 million units by 2030, he said.
Tesla’s adjusted EPS will likely grow from $3.20 in 2023 to $22 in 2030 at 32% CAGR, helped by auto gross margin expansion, Tesla Energy’s contribution, operating leverage and cash investment, he added.
Black clarified that his valuation framework does not include full-self driving licensing, robotaxi, or the Tesla Bot. FSD global take rate of 15%, however, is accounted for, he said. The valuation also assumes energy revenue rising eight times, he added,
“So the question becomes: Is 58x too expensive for the best in class EV player growing vols at +28% CGR and EPS at +32% CGR?” Black asked. “Find me another megacap with that type of growth and valuation,” he said.
Tesla closed Thursday’s session up 4.91% at $251.05, according to Benzinga Pro data. The stock is up about 104% year-to-date.
Check out more of Benzinga’s Future Of Mobility coverage by following this link.
Read Next: Cybertruck Vs. R1T: EPA Data Reveals How Tesla’s EV Pickup Pales In Comparison To Rivian’s Offering
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
