Tesla Devotees Go All In Driving $300 Billion Rally on Trump Win
Monday, Nov 11, 2024 2:41 pm ET
2min read The election of Donald Trump as the next U.S. President has sparked a remarkable rally in Tesla's stock, with shares surging nearly 40% since Election Day. This meteoric rise, driven by optimism about the potential for a more favorable regulatory environment, has added over $300 billion to Tesla's market capitalization. However, the company's valuation remains a concern, with shares trading at over 100 times forward earnings, significantly higher than other tech giants.
Tesla's stock price has been on a roller-coaster ride in 2024, down 43% for the year in April before staging a dramatic comeback. The company's shares have been on a tear since October, rising 18% from the close on Oct. 23 when Tesla reported a better-than-expected quarterly profit and gave solid guidance. Following Trump's victory, the stock has gained another 28%, driven by Musk's prominent role within the Trump campaign and the "meme-stock" phenomenon.
Wedbush Securities analyst Dan Ives believes that a Trump White House could fast-track the implementation of Tesla's full self-driving software, as the "federal regulatory spiderweb" the company has encountered in recent years clears significantly. This optimism, coupled with the potential for higher tariffs on Chinese EV players, has fueled the rally. However, a trade war might not be in Tesla's best interest, as China is a key market for the company.
Despite the optimism, Tesla's valuation remains a concern. The stock is currently trading at over 100 times its forward earnings, making it the most overvalued among the Magnificent Seven tech giants. Even among the tech giants in the Magnificent Seven, America's seven largest companies by market cap, that multiple is in a league of its own. The member with the next highest P/E ratio is blockbuster AI chipmaker Nvidia, currently the largest company in the world, with its stock trading at roughly 36 times next year's projected earnings.
The benefits to Tesla of a Trump win are not as obvious at first glance. With EV policy potentially de-emphasized and possible elimination of EV purchase credits, it would be negative to Tesla's U.S. vehicle sales. However, Tesla's strong brand and competitive advantages, such as its scale and scope in the EV industry, could help it maintain a competitive edge in a non-EV subsidy environment.
Tesla's AI and autonomous driving potential has significantly contributed to investor sentiment, with Wedbush Securities' Dan Ives stating that it represents a $1 trillion opportunity for the company. Musk's bet on Trump's win is seen as a "bet for the ages" by Ives, who believes a Trump administration could fast-track the implementation of Tesla's full self-driving software. However, the software still requires close driver supervision and has faced lawsuits, raising questions about its readiness.
In conclusion, Tesla's stock rally, fueled by optimism around Elon Musk's support for Donald Trump and the potential for a friendlier regulatory environment, has drawn comparisons to the "meme-stock" phenomenon. While the rally has added over $300 billion to Tesla's market capitalization, investors should remain cautious about the company's valuation and growth prospects. As the company continues to navigate the volatile EV market and pursue its ambitious AI and autonomous driving goals, investors should exercise due diligence and maintain a critical and analytical perspective.
Tesla's stock price has been on a roller-coaster ride in 2024, down 43% for the year in April before staging a dramatic comeback. The company's shares have been on a tear since October, rising 18% from the close on Oct. 23 when Tesla reported a better-than-expected quarterly profit and gave solid guidance. Following Trump's victory, the stock has gained another 28%, driven by Musk's prominent role within the Trump campaign and the "meme-stock" phenomenon.
Wedbush Securities analyst Dan Ives believes that a Trump White House could fast-track the implementation of Tesla's full self-driving software, as the "federal regulatory spiderweb" the company has encountered in recent years clears significantly. This optimism, coupled with the potential for higher tariffs on Chinese EV players, has fueled the rally. However, a trade war might not be in Tesla's best interest, as China is a key market for the company.
Despite the optimism, Tesla's valuation remains a concern. The stock is currently trading at over 100 times its forward earnings, making it the most overvalued among the Magnificent Seven tech giants. Even among the tech giants in the Magnificent Seven, America's seven largest companies by market cap, that multiple is in a league of its own. The member with the next highest P/E ratio is blockbuster AI chipmaker Nvidia, currently the largest company in the world, with its stock trading at roughly 36 times next year's projected earnings.
The benefits to Tesla of a Trump win are not as obvious at first glance. With EV policy potentially de-emphasized and possible elimination of EV purchase credits, it would be negative to Tesla's U.S. vehicle sales. However, Tesla's strong brand and competitive advantages, such as its scale and scope in the EV industry, could help it maintain a competitive edge in a non-EV subsidy environment.
Tesla's AI and autonomous driving potential has significantly contributed to investor sentiment, with Wedbush Securities' Dan Ives stating that it represents a $1 trillion opportunity for the company. Musk's bet on Trump's win is seen as a "bet for the ages" by Ives, who believes a Trump administration could fast-track the implementation of Tesla's full self-driving software. However, the software still requires close driver supervision and has faced lawsuits, raising questions about its readiness.
In conclusion, Tesla's stock rally, fueled by optimism around Elon Musk's support for Donald Trump and the potential for a friendlier regulatory environment, has drawn comparisons to the "meme-stock" phenomenon. While the rally has added over $300 billion to Tesla's market capitalization, investors should remain cautious about the company's valuation and growth prospects. As the company continues to navigate the volatile EV market and pursue its ambitious AI and autonomous driving goals, investors should exercise due diligence and maintain a critical and analytical perspective.
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