Gary Black Increases Tesla Price Target By 27% to $380, Citing Confidence in New Budget Model Launch

Tesla Inc. (TSLA) is poised for significant growth due to a new affordable electric vehicle, as indicated by prominent investor Gary Black. On Monday, he raised his price target for the company from $300 to $380, reflecting a 27% increase.

What’s Behind the Increase? Black, who is the Managing Partner at The Future Fund LLC, has expressed "increased conviction" regarding Tesla's potential launch of a $25,000 to $30,000 hatchback model. This new model is expected to attract around 15% of the global compact car market.

His upgraded earnings projections outpace the consensus reached by Wall Street analysts. Black anticipates adjusted earnings per share (EPS) of $3.80 for 2025 and $17.00 by 2030.

Recent portfolio adjustments have also played a role in Black's updated view. In November, his fund reduced its Tesla holdings at a price of $351 after the shares soared 150% from their lows in April. The investment strategy involving Tesla has proven fruitful, with an average purchase price of $162 and a selling price of $252 since the beginning of 2023.

Tesla remains one of the top five holdings in The Future Fund Active ETF (FFND).

Price Target and Growth Factors

Black’s message was clear: he believes the hatchback launch will enable Tesla to compete effectively in the global compact car sector and further strengthen its market position. He used a PEG ratio of 1.75x and estimates long-term EPS growth at 25% as part of his valuation model.

Identifying key growth catalysts, Black noted several factors that could contribute to Tesla's expansion, including:

1. Annual electric vehicle adoption growth of 20-25%
2. Potential interest rate cuts by the Federal Reserve
3. Increased adoption rates for Full Self-Driving (FSD) technology
4. Efforts that could streamline the autonomous driving licensing process, especially under the administration of President-elect Donald Trump
5. The anticipated launch of the $25,000-$30,000 Model Q Compact in the first half of fiscal year 2025

Risks to Consider Despite his optimistic outlook, Black also pointed out possible risks that could impact Tesla, including the removal of the $7,500 EV tax credit and regulatory hurdles related to autonomous driving.

Current Stock Performance

Following the announcement, Tesla’s stock ended the trading day at $389.79, reflecting a slight 0.15% increase. After-hours trading saw a further rise to $392.35, marking an additional 0.66% gain. Since the start of the year, Tesla shares have rallied by an impressive 56.91%.

As of now, Tesla holds a consensus price target of $251.06 from 34 analysts with estimates ranging from a high of $411 to a low of $24.86. Recent ratings from analysts at Deutsche Bank, Guggenheim, and BofA Securities average $315, suggesting a potential downside of about 19.71% from current trading levels.

It will be interesting to see how Tesla navigates these opportunities and challenges in the coming years.

Tesla, Black, Investor