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Tesla stock (NYSE: TSLA) has seen a spectacular rally since Donald Trumpâ€s election. While the stock pared some gains subsequently, it rose sharply yesterday amid reports that Trump could ease autonomous driving rules.
The rise in Tesla stock after Trumpâ€s election is not all that hard to comprehend. The companyâ€s CEO Elon Musk was among the biggest backers of Trump and the president-elect has obliged him along with former Republican presidential candidate Vivek Ramaswamy to lead the Department of Government Efficiency (DOGE). Among others, DOGE has the mandate to advise the president on cutting “excess†regulations.
Trump is no fan of regulations and bank stocks rose after his elections on hope that he would relax some regulations – just as he did in his first tenure.
Several Analysts Have Raised Their Target Price on Tesla
Notably, several analysts have raised Teslaâ€s target price since Trumpâ€s election with Wedbushâ€s Dan Ives raising his to a Street-high of $400. “We believe the Trump White House win will be a gamechanger for the autonomous and AI story for Tesla and Musk over the coming years,†said Ives in his report.
He added, “Now the next step in this broader Tesla strategic vision begins which is the autonomous and AI era as we believe Tesla remains the most undervalued AI play in the market today.â€
According to Ives, “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 TSLA bulls as now Tesla and Musk are set to reap the benefits from a new friendlier regulatory era in the Beltway ahead.â€
Musk Believes Bulk of TSLAâ€s Valuation Comes from Autonomous Driving
Notably, Musk believes that the bulk of Teslaâ€s valuation comes from the companyâ€s autonomous driving business. While Tesla has missed several self-imposed deadlines for full autonomy, Musk is quite categorical that itâ€s an aim that Tesla continues to strive for.
During the Q1 2024 earnings call earlier this year Musk said, “If somebody doesnâ€t believe Teslaâ€s going to solve autonomy, I think they should not be an investor in the company.â€
Tesla Unveiled Its Robotaxi Last Month
Last month, Tesla held the “We, Robot†event where it unveiled the Cybercab robotaxi. The Cybercab is a low two-seater and has no steering wheels or pedals and Musk predicted that Tesla can sell over 2 million units of these annually. He even touted the possibility of cybercab sales rising to as high as 4 million units annually.
The company also revealed that it would produce a bigger vehicle named Cybervan which would have the capacity to carry upto 20 people.
Deutsche Bank Sees TSLAâ€s Post-Election Runup as Justified
While some analysts see the steep post-election rally in TSLA stock as unjustified, Deutsche Bank believes that the stock is rallying for a reason.
Deutsche Bank analyst Edison Yu said, “Beyond attributing the price action to tactical factors (e.g., retail exuberance, algos, short covering due to lack of near-term negative catalysts, etc.), we see potential large terminal value benefits to Teslaâ€s efforts in auto, robotaxi, and even humanoid robotics.â€
Notably, Tesla showcased the abilities of its Optimus humanoid at the “We, Robot†event last month. Musk said that the humanoid is doing some unspecified tasks in Tesla’s factory and the company should be able to sell it externally by the end of 2025.
“Optimus will be more valuable than everything else combined because if youâ€ve got a sentient humanoid robot that is able to navigate reality and do tasks at request, there is no meaningful limit to the size of the economy,†said Musk at the event.
Jim Cramer Is Also Bullish on Tesla
Jim Cramer is also bullish on Tesla – not because Trump might ease autonomous driving rules but because of Musk, who while being controversial has been key to the companyâ€s growth story.
“While I donâ€t buy the national self-driving mandate, I think nothing truly dulls the case for owning Tesla,†said Cramer.
He added, “The Musk premium will work its magic in other ways, perhaps favorable municipalities and Tesla rentals next to federal highways.â€
Cramer also stressed that Tesla is a tech company and said, “The others are automakers, and a tech company can get an insanely high price-to-earnings multiple with no one blinking so much as an eye about it.â€
Not All Buy the TSLA Story
Meanwhile, as has been the case always, a section of the market does not buy the TSLA story despite Trumpâ€s victory. Bernstein, for instance, reiterated its underperform rating on Tesla even as it admitted that the company might benefit from favorable self-driving regulations under a Trump administration.
“Trump is anti-EVs, but TSLA is on a tear. Teslaâ€s stock is up 28% since Trumpâ€s election victory, despite the fact that the new administration will likely end IRA consumer and battery manufacturing tax credits, potentially lower emissions standards and could increase tariffs on Chinese batteries,†said the brokerage in its note.
TSLA Short Sellers Have Lost Billions
That said, the recent rally in Tesla stock has left a big hole in short sellers†pockets and they are sitting on paper losses running into billions of dollars.
Notably, while Tesla often features among the most shorted stocks, betting against the electric vehicle (EV) giant has been a risky proposition. Short sellers lost billions betting against Tesla in 2020 and 2021 as the stock soared 740% and 50% respectively. Cumulatively, short sellers lost $60 billion in these two years shorting TSLA stock.
Short sellers did make $15.85 billion in paper profits in 2022 as Tesla stock fell 65% and had its worst year ever.
However, 2023 was yet another nightmarish year for Tesla bears as the stock rallied smartly amid the tech rally. Tesla shorts were having a good time in 2024 as the stock was in the red for the most part.
While Tesla stock showing no signs of a major retreat, short sellers could end up losing big in 2024 also.
