Tesla Inc. faces avoidance from most institutional investors because its stock is considered too expensive relative to expected profit growth, according to The Future Fund LLC's Gary Black. He argued that the technological advantages of Full Self-Driving (FSD) are insufficient to justify the current valuation, which he described as stretched.

Valuation metrics deter investment

In an X post on Wednesday, Black pointed to Tesla’s 2026 price-to-earnings ratio of 205 times. This compares with projected earnings-per-share growth of 35% from 2026 through 2030. These figures produce a PEG ratio of 6.0 times, a metric that compares valuation with expected growth. Black also cited declining forward earnings estimates, noting that 2027 EPS estimates are down 17% year-to-date.

"$TSLA‘s stretched valuation (2026 P/E of 205x vs 2026-2030 eps growth of +35%, PEG 6.0x) and declining forward earnings estimates (2027 EPS est -17% YTD) are why most institutional investors avoid the stock," Black wrote.

Earnings revisions and market performance

Black supported his assessment with charts showing quarterly and annual earnings-per-share forecasts through 2030, alongside consensus 2027 adjusted earnings estimates that have fallen steadily in recent months. He stated that valuation and negative earnings revisions explain why Tesla continues to underperform the Nasdaq 100. Black emphasized that while the unique technological advantages of Tesla FSD are recognized, valuation and falling analyst estimates are critical factors often overlooked.

Product lineup and sales drivers

Beyond valuation, Black questioned whether FSD is driving sales, noting that consumers have little awareness of the technology. He contrasted this with Rivian Automotive Inc., which recently rallied following a delivery beat without relying on autonomy hype. Additionally, Black suggested that Tesla’s second-quarter delivery beat was aided by a spike in gas prices to $3.86 per gallon over the July Fourth weekend, up from $2.98 before the conflict in Iran. He indicated that Tesla shares could rebound if analysts raise second-quarter and full-year 2026 earnings estimates.

To address concerns about an aging lineup, Tesla recently launched the three-row Model Y L in the U.S. at $61,990, with deliveries expected around September or October. Investor Ross Gerber of Gerber Kawasaki noted that the post-delivery stock decline has renewed focus on lineup challenges and falling gas prices.

The National Highway Traffic Safety Administration (NHTSA) has identified a 'clear pattern' of driverless autonomous vehicles (AVs) interfering with law enforcement and first responders, prompting a demand for immediate fixes. NHTSA Administrator Jonathan Morrison criticized AV operators on Wednesday, citing instances where robotaxis entered live incident areas and blocked paths for ambulances and firefighters. Morrison stated that an AV unable to safely interact with first responders poses a danger to the general public and that companies must prioritize these interactions.

In a letter addressed to the industry, Morrison set a deadline for the end of July for companies to address the safety shortfall. The agency reported receiving multiple reports of vehicles obstructing emergency operations, including entering flooded areas and construction zones. The NHTSA administrator indicated that the agency will schedule meetings with driverless automated driving system developers by the end of the month to discuss possible solutions. The communication did not name specific companies or operators.

The regulatory scrutiny follows recent actions by major industry players. Alphabet Inc.-backed Waymo recently issued recalls for nearly 3,900 robotaxis following reports of software issues affecting vehicles in construction zones. Additionally, Waymo announced the end of its partnership with Uber Technologies Inc. in Phoenix. Meanwhile, Amazon.com Inc.-backed Zoox unveiled an updated robotaxi, claiming the ability to produce 100 units at its California facility, having completed over 500,000 rides in Las Vegas.

Tesla Inc. remains under significant examination regarding its autonomous technology. CEO Elon Musk and AI lead Ashok Elluswamy have denied claims that the company's Full Self-Driving (FSD) technology was involved in a fatal crash in Texas, despite probes from both the NHTSA and the National Transportation Safety Board. The agency is currently probing over 3.2 million Tesla vehicles related to the FSD tech, with the investigation recently advancing to Engineering Analysis, a stage that typically precedes a recall.