Tesla Inc. (NASDAQ:TSLA), despite facing challenges such as slowing growth and reduced profitability, has found support from fund manager David Baron, who remains optimistic about the electric vehicle (EV) giant’s prospects. Tesla, currently the weakest stock on the Nasdaq 100 in the current year, witnessed a 12% drop following a warning of slower expansion in 2024. Despite this setback, Baron anticipates a substantial rebound for Elon Musk’s company.
Baron, managing the Baron-Focused Growth Fund, is betting on Tesla’s strong brand and Elon Musk’s leadership to navigate through challenging times. Baron expects Tesla’s stock to reach $1,200 by 2030, representing a remarkable 550% increase from its current levels. As of December 31, Tesla and Musk’s SpaceX were the largest holdings in the fund, contributing to a 28% rise in the fund’s performance last year.
Even with Tesla projecting slower sales growth in the coming year, Baron maintains a positive outlook, predicting the stock to reach around $300 within the next 12 months, up from its closing price of approximately $183.
Baron acknowledges that while Tesla may not achieve the previously anticipated 50% annual growth, the company is still expected to grow its volume by 15% to 20% annually in a challenging environment, generating $7,000 per car in gross profit.
In 2023, Tesla delivered 1.8 million cars, marking a 38% increase from the previous year. Despite the current EV industry challenges, Wall Street analysts estimate a 17% increase in unit sales for Tesla in the current year.
Baron’s investment strategy aligns with his father Ron Baron’s philosophy of investing in companies where leaders have significant stakes and can potentially double in market value over five to six years, reflecting compounded growth of 15% per year. This approach focuses on long-term value creation rather than short-term returns.
Baron’s belief in Tesla’s future is crucial to achieving his fund’s goal of increasing assets to $2 billion this year from $1.3 billion as of December 31. The fund manager also projects positive performance from other holdings, including CoStar Group Inc., Arch Capital Group Ltd., Figs Inc., and Choice Hotels International Inc.
Baron emphasizes that Elon Musk’s interests are aligned with investors, instilling confidence that he will make prudent decisions to maintain the trajectory of Tesla and SpaceX. Despite concerns from some investors and analysts about Tesla’s growth narrative, Baron remains steadfast in his conviction about the long-term potential of both companies under Musk’s leadership.
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