Tesla Stock Surges: Wall Street's Growing Bullishness After Election

Tesla's stock has been on a roller-coaster ride in 2024, but recent events have sparked a surge in investor optimism, with Wall Street analysts growing increasingly bullish on the electric vehicle (EV) giant. The company's shares have soared following the U.S. presidential election, with many attributing the rally to the victory of former President Donald Trump and Elon Musk's prominent role in his campaign.

Musk's vocal support for Trump, including financial contributions and campaign appearances, has fueled investor optimism about Tesla's prospects under a Trump administration. Post-election, Tesla's stock surged 26% in just three days, catapulting its market capitalization above $1 trillion. Analysts like Dan Ives at Wedbush Securities argue that a Trump win could be a "gamechanger" for Tesla's autonomous and AI ambitions, potentially leading to a more favorable regulatory environment and increased market share.



However, caution is warranted, as Tesla's valuation remains high, and its growth potential is not guaranteed. Despite the recent rally, Tesla's stock is still only just catching up with the broader S&P 500 this year. Prior to the Trump-fueled gains, it was the worst performer among the so-called Magnificent Seven mega tech companies. Some investors see this as a sign that the stock has room for a catch-up rally before the end of the year, but others remain skeptical.

Tesla's profits for the year are estimated to drop by 23%, making it the only Magnificent Seven company to see a decline. In addition, its attempt at becoming an artificial intelligence powerhouse, the main premise on which its massive valuation rests, is still far from certain, especially after its self-driving vehicle failed to rouse much enthusiasm following its unveiling in October. Tesla shares are trading at about 102 times forward earnings, compared to AI-darling Nvidia's 39 times, raising concerns about the company's ability to justify its high valuation.



Under a Trump administration, Tesla could benefit from regulatory changes, such as stricter tariffs on imported cars, which could boost domestic EV production. Additionally, potential elimination of EV purchase credits could widen Tesla's competitive moat, making competing EV models less economic. However, Tesla's autonomous and AI ambitions, which have driven recent stock optimism, face regulatory hurdles that a Trump administration could help clear, potentially fast-tracking these initiatives.

Despite the recent surge, Tesla's stock remains volatile, with investors and analysts divided on its future prospects. While some see a catch-up rally on the horizon, others caution against overvaluing the stock and highlight the challenges in justifying its high valuation. As always, investors should exercise due diligence and maintain a critical perspective when evaluating Tesla's market performance and potential.