Source: PaxForex Premium Analytics Portal, Fundamental Insight
Tesla has seen its stock skyrocket by over 1,700% over the past decade, creating substantial wealth for many, including its CEO, Elon Musk, now the world’s richest individual. The recent US presidential election victory of Donald Trump appears to have catalyzed another surge in Tesla’s stock, sparking speculation about the new administration’s potential impact on the company’s future.
Musk played a significant role in Trump’s 2024 presidential campaign, contributing an estimated $200 million through his super PAC, America PAC, which targeted low-propensity voters. The market seems to perceive a connection between Musk’s political support and Tesla’s economic prospects. Following Trump’s victory, Tesla’s shares have climbed roughly 40%, pushing its market capitalization to $1.1 trillion and increasing Musk’s wealth by $70 billion. However, investors should approach this rally cautiously and consider how a Trump presidency might influence Tesla’s core business fundamentals.
Trump’s pro-business policies, such as a proposed corporate tax reduction from 21% to 15%, could benefit companies with significant US operations. However, Tesla’s global footprint, particularly its substantial manufacturing presence in China, raises questions about whether it would qualify for these lower rates. Furthermore, Trump’s protectionist stance could conflict with Tesla’s plans to expand vehicle production in Mexico to reduce costs in an increasingly competitive electric vehicle (EV) market. Similarly, a more aggressive trade posture toward China might increase risks for Tesla in one of its most critical markets.
While direct economic benefits from Trump’s presidency remain uncertain, the new administration may reduce perceptions of political hostility toward Tesla and Musk, which were amplified during the Biden administration. Tesla’s exclusion from the 2021 EV Summit in Washington, D.C., raised eyebrows, and SpaceX, another Musk-led venture, recently sued California regulators, alleging political bias in decisions affecting its operations. A more supportive political climate under Trump could provide Tesla with greater freedom to pursue new growth areas like generative artificial intelligence and self-driving technology, which will require significant regulatory cooperation for mass adoption.
Tesla’s latest financial results highlight the importance of diversifying its revenue streams. Third-quarter revenue grew by just 8% year-over-year to $25.2 billion, with automotive sales increasing only 2%. These figures suggest that Tesla’s core EV business may have reached a saturation point, necessitating expansion into new technologies to sustain growth.
Despite these challenges, Tesla remains an outlier. Its stock has consistently commanded high valuations, driven by market confidence in Musk’s ability to achieve groundbreaking innovations. A more business-friendly administration may provide the environment needed to realize Musk’s long-term vision.
While Tesla still holds the potential to create more wealth for investors, caution is warranted. Its forward price-to-earnings (P/E) ratio of 105 indicates a highly overvalued stock relative to its current fundamentals. Prospective investors may want to wait for concrete advancements in Tesla’s self-driving and AI initiatives before making a move.
As long as the price is above 310.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 319.62
- Take Profit 1: 330.00
- Take Profit 2: 350.00
Alternative scenario:
If the level of 310.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 310.00
- Take Profit 1: 290.00
- Take Profit 2: 270.50
