Tesla shares powered higher Monday, extending an impressive autumn rally that included a $230 billion boost in market value last week, as investors continue to reprice the group’s post-election prospects and a top Wall Street analyst issues a bullish outlook for its self-driving ambitions.
Tesla (TSLA) is seen as one of the prime beneficiaries of former President Donald Trump’s sweeping election victory, which is likely to include Republican control of Congress, thanks in part to the vocal, and monetary, support for his candidacy from CEO Elon Musk.
Musk, who could also be be in line for a key role in the Trump administration, has touted his interest in heading a so-called ‘government efficiency commission’ aimed at lopping hundreds of billions of spending from the federal budget.
He’s also weighed in on potential cabinet appointments, added his weight to comments on the future of the Federal Reserve and reportedly sat-in on a phone call between the President-elect and Ukraine leader Volodymyr Zelensky.
That’s all played havoc with Tesla short sellers, who had bet against the group heading into last month’s third quarter earnings report, with data from S3 Partners indicating mark-to-market losses of around $5.2 billion between election day and the close of trading Friday.
Filings show Elon Musk spent $130 million supporting Republican candidates in the November election, including Donald Trump. Tesla stock has gained $230 billion since Tuesday’s result.
The opposite bet, and more lucrative Tesla bet, however, was actually wagered earlier this year by Mush himself, according to longtime Tesla bull Dan Ives, who sees a Trump White House as a “gamechanger for the autonomous and AI story for Tesla and Musk over the coming years”.
Big bet payoff?
A Trump administration is also likely to revamp the broader electric-vehicle landscape by imposing stricter tariffs on cars made overseas and removing some of the tax credits and rebates that have unpinned the profit potential for newer market entrants such as Ford Motor (F) and General Motors (GM) .
“The stakes were high after Musk spent more than $130M to help elect Donald Trump and other Republicans this election cycle, according to filings,” said CFRA analyst Garrett Nelson.
“Depending on the outcome of the House, we also see risks to current electric vehicle tax credits from changes to existing tax legislation, which we think will widen Tesla’s competitive moat by making competing EV models even more uneconomic, as we believe Tesla is the only profitable manufacturer of EVs,” he added.
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Reuters has also reported that Musk could push the new administration to drop potential action from the National Highway Traffic Safety Administration, long at thorn in the side of Musk’s self-driving ambitions.
“In essence, Musk made a strategic and big bet on a Trump White House win that will be known as a ‘bet for the ages’ for Tesla bulls as now Tesla and Musk are set to reap the benefits from a new friendlier regulatory era in the Beltway ahead,” said Ives, who lifted his price target on Tesla by $100, to $400 per share in a note published Monday.
Ives said he sees the AI portion of Tesla’s business to be worth around $1 trillion, and sees the stock scaling the $2 trillion threshold, in terms of market cap, over the next twelve to eighteen months.
“We estimate the AI and autonomous opportunity is worth $1 trillion alone for Tesla and we fully expect under a Trump White House these key initiatives will now get fast tracked as the federal regulatory spiderweb that Musk & Co. have encountered over the past few years around FSD/autonomous clears significantly under a new Trump era,” Ives argued.
More gains ahead
Musk told investors last month that he thought the company would solve its current Full-Self-Driving challenges by the end of next year, something he has said will be the key determinant for Tesla’s ultimate stock price.
“If we execute on our objectives, I think we will, my prediction is, Tesla will become the most valuable company in the world and probably by a long shot,” Musk said.
Tesla posted stronger-than-expected third quarter earnings of 72 cents per share last month, with profit margins improving by nearly two percentage points as the cost of producing its signature EVs fell to a record low and global pricing stabilized.
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Tesla also said its expects a “slight growth in vehicle deliveries” this year, following last year’s record 1.8 million tally, with CEO Elon Musk adding on the investor call that he sees the potential for a 20% to 30 growth rate in 2025 “not withstanding negative external events … like some big war breaks out or interest rates go sky high or something like that.”
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“We can’t overcome massive force majeure events. But I think with our lower-cost vehicles with the advent of autonomy, something like a 20% to 30% growth next year is my best guess,” he added.
Tesla shares were marked 7% higher in premarket trading to indicate an opening bell price of $343.6 each, a move that would take the stock’s six-month gain to around 100%.
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