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The final quarter of the year has been exceptional for Elon Musk and Tesla, with the electric vehicle manufacturer achieving record-breaking stock performance in November, coinciding with the U.S. election cycle.
While a favorable political climate under a Trump administration may support the electric vehicle sector, Tesla’s recent surge goes beyond speculation. Analysts are increasingly adopting a long position on the stock, indicating a growing confidence in Tesla’s long-term growth.
The stock price rise is largely attributed to innovative product development and ambitious expansion strategies. Tesla’s trajectory provides valuable insights into capitalizing on emerging opportunities and maintaining a competitive edge in a rapidly evolving market.
This is a closer look at the various factors that supported a meteoric surge in Tesla’s stock price.
Tesla’s Trump Card
The Musk-Trump political connection has given the stock a major bump. Shareholders would’ve been pleased to see the stock price rise by over 70% in the wake of the presidential elections. November proved to be the company’s best performance to date, with the shares closing at a record high of $424.77 on November 4th, the day before elections.
According to Stifel analyst Stephen Gengaro, Musk can expect to continue to thrive under a Trump administration, which “bodes very well for Tesla”. With anticipated support from the highest office, Tesla is likely to move forward with plans to innovate the full self-driving automotive industry.
Overview
Observers indicate a clear correlation between Musk’s friendship with president-elect, Donald Trump, and his net worth. With a generous $270 million poured into the Trump campaign, Musk has been a vocal supporter and financial backer of the Republican representative.
With close ties to the incoming president, Musk has had a seat at the table alongside world leaders, joined the campaign trail, and was even considered for a role within the proposed Department of Government Efficiency – an envisioned advisory commission to reduce wasteful expenditure. Musk has used these opportunities to raise questions and advocate for a “federal approval process for autonomous vehicles”, rather than having decisions made at a state level. The regulatory process in its current form creates friction for the company, and Musk outlined his plans to use his relationship with Trump in a third-quarter call.
While the stock has gone down 8.28% at the time of writing (December 18, 2024), the dip does little to negate the company’s impressive market performance. The question remains, what is behind this meteoric rise?
Optimism meets Strategy
Tesla’s recent stock price rally can be attributed to several factors, which ultimately boil down to two concepts: market confidence and long-term strategy.
Investors have taken into consideration Musk’s plans to roll-out a more affordable electric vehicle, as early as the second quarter of 2025. With a lower-priced option hitting the market, Tesla is likely to see immense growth, which has whet the appetite of shareholders.
Robotaxis represents another exciting opportunity to further Tesla’s dominance in the electric vehicle landscape. The Cybercab is expected to be production-ready in 2027 and represents an innovative approach to passenger transportation. This also represents an opportunity for the company to become first-movers in the autonomous vehicle sub-market.
Apart from the new product development in the works for Tesla, the company has also shown grit and resilience in the face of difficult economic conditions.
The stock price has weathered some of the broader market instability, like global inflation and interest hikes. The share price has remained relatively stable and investors are looking at the long-term benefits.
Accounting for the Dip
While the overall performance of the Tesla stock has been on an upwardward trajectory, analysts saw a dip on December 18, 2024.
A couple of factors contributed to the decline:
Market shifts.
Interest rate hikes.
Speculated rate cuts.
The tech and electric vehicle sectors are sensitive to the Federal Reserve Bank’s actions, and interest rate changes have a significant impact on growth projections and the cost of borrowed capital. Additionally, Tesla, in particular, has had to overcome internal challenges, including mass layoffs and increased competition in the electric vehicle industry.
With the price of lithium carbonate dropping (the main element used for battery production), electrical vehicle production is entering the mainstream. As competition ramps up in the space, there’s a battle between first-movers like Tesla, new players like Rivian and Lucid Motors, and of course, legacy manufacturers like Ford and Mercedes-Benz. While Tesla certainly broke the mold when it first introduced its Roadster in 2008, its market share is quickly being diluted by competitors.
Entering the autonomous vehicle market is a smart strategy to ensure the company is constantly gaining ground, even as others start to play catch up. However, this isn’t without its own set of challenges. Chief among them is road safety regulation, which has been a major stumbling block for Tesla. While 2027 has been earmarked for the arrival of the Robotaxi Cybercab, there may be any number of unanticipated challenges along the way. As a first-mover, Tesla will have to pave the way, and the setbacks could prove to be too much for investor stamina.
Mixed Views on Tesla’s Future
The dip on December 18 notwithstanding, analysts seem to maintain an optimistic outlook on Tesla’s future. Analysts like Ben Kallo from Baird and Stephen Gengaro from Stifel have raised their price target. At Baird, the pricing was adjusted from $280 to $480, while Stifel increased the price from $287 to $411. Kallo is banking on Tesla’s innovation, and believes that the anticipated rollout of the low-cost Tesla model and Cybercab are growth factors.
On the other hand, some investors are considering the threat that broader market conditions pose. With interest rates fluctuating and instability in the global economic landscape, they’re concerned that the share price may struggle to remain bullish in the short or medium term.
Investors’ Consideration
Investors will need to closely monitor Tesla’s performance while also keeping an eye out for announcements from the Federal Reserve Bank. This recent dip is not all bad; it presents an opportunity for new investors to buy stock and for loyalists to increase their stake. The two main considerations should be:
How likely are Tesla to realize their ambitious plans to create a cheaper electric vehicle, and produce a self-driving taxi that meets road safety regulations?
How could global economic conditions impact Tesla, and how likely is the company to withstand additional external pressure?
Tesla’s continued, long-term success lies in the company’s ability to gain ground through innovation in an effort to make up for the diluted market share in the electric car industry. Investors going long on Tesla are in for an exciting, potentially very lucrative journey with unpredictable twists and turns!
Conclusion
In conclusion, Tesla’s stock has been on an unpredictable ride, marked by significant gains followed by recent declines. The company’s resilience, fueled by market optimism surrounding its advancements in electric vehicles and autonomous driving, continues to captivate investors.
Despite facing external pressures, such as economic turbulence and increasing competition from traditional automakers and new entrants, Tesla’s innovative edge remains a key driver of its market value. Analysts are divided, with some maintaining a bullish outlook due to the company’s leadership in electric vehicle and autonomous technology, while others caution against volatility in the broader market.
As Tesla moves toward launching its robotaxi service and pushing for more affordable electric vehicle models, its potential for long-term growth is undeniable. However, investors should remain mindful of both the opportunities and challenges ahead. Tesla’s ability to maintain its competitive advantage and navigate economic uncertainties will determine its trajectory in the months to come. For those willing to ride the wave of volatility, Tesla remains a stock to watch closely.