Investing.com -- Gary Black has typically been a vocal supporter of Tesla (NASDAQ:TSLA), but a recent filing has revealed that the Chicago-based portfolio manager has cut his fund's position in the electric vehicle (EV) giant.
Who is Gary Black?
Black, a former Aegon (NYSE:AEG) Asset Management chief executive, opened The Future Fund LLC in 2021. It oversees two vehicles with a total of $8.8 million under management, a profile by financial services group Morningstar showed.
Tesla has long been one of the fund's biggest holdings. However, according to a fourth-quarter Securities and Exchange Commission filing dated on Feb. 14, The Future Fund slashed its stake in Tesla by 1% versus the prior three-month period to 104,450 shares. As of Dec. 31, the position was valued at just under $26 million.
Black defended the move in a series of posts on social media platform X last week, saying that Wall Street estimates for Tesla deliveries in the first quarter and in 2024 are "way above where they are likely to come in."
One-time headwinds to Tesla's performance in the current quarter are also piling up, he noted, including a suspected arson attack on the company's factory in Berlin and supply disruptions in the Red Sea region that stem from ongoing violence in the Middle East.
Yet Black said the fund continues to own Tesla because it is "best positioned" to take advantage of an expected global surge in adoption of EVs by the end of the decade.
"We believe [Tesla] has the best EV products on the market," Black wrote.
More Tesla price cuts on the horizon?
Tesla has warned that it expects to see "notably lower" sales growth in 2024 versus the prior year due to intensifying competition and stalling demand from cost-conscious carbuyers.
In a presentation to shareholders in January, the company said it is currently "between" an initial growth wave sparked by the popularity of its Models 3 and Y, and a second that it believes will be initiated by a lower-cost, next-generation offering. Chief Executive Elon Musk told analysts in a post-earnings call that this new car is slated to begin production in the second half of 2025, claiming that it will feature "revolutionary manufacturing technology."
A total of 484,507 EVs were delivered during the fourth quarter, up from 435,059 in the prior three-month period. Tesla said it had hit its goal of 1.8 million deliveries in 2023, but did not provide a current-year forecast for the figure.
Margins were dented after Tesla, confronted with strong competition in its key Chinese market and American consumers wary of the elevated costs often associated with EVs, moved to slash prices. An increase in research expenditures and costs related to the ramp-up of production of its Cybertruck pick-up also weighed on the company's results. Gross margins slipped to 17.6%.
In a note to clients on Monday, analysts at Deutsche Bank said that they expect Tesla's first-quarter deliveries and earnings will miss Wall Street estimates. They also flagged a "material downside risk" to its full-year projections, citing limited volume growth and pressure on profitability from recent price cuts.
"In the near term, we think worries over 2024 volume and earnings could further dampen investor sentiment," the Deutsche Bank analysts said.
The statement echoed concerns raised by Black, particularly his argument that there is a "moderate risk" Tesla may bring down vehicle prices even further. This, he said, "could cause analysts to reduce [second quarter] to [fourth quarter] delivery and [earnings per share] estimates."
Black has contended that Tesla's decision to cut prices has only incrementally boosted volumes, adding that the group's management should instead ditch their long-standing aversion to major advertising campaigns and spend on marketing.
The "absence of [a] global [communications] effort" to convince traditional combustion-engine and hybrid car owners to switch to EV options presents a possible hurdle for Tesla's future performance, Black said.
Learn more about Tesla
There are still dozens of companies working to develop electric vehicles at scale. But it’s arguably Tesla that first brought EVs to the attention of the general public. Learn more about this company’s incredible journey with Tesla facts, statistics and sales figures.
Investors can also take a step further and explore the wider case for being bullish or bearish on Tesla’s future growth.