Analysts Turn Bullish on Tesla After Trump’s Election as US President

Tesla stock (NYSE: TSLA)  rose almost 15% yesterday and was the rare stock in the renewable energy and electric vehicle (EV) ecosystem to have rallied after Donald Trump’s election as the 47th US president.

It was otherwise pretty much a bloodbath in green energy shares yesterday which is not surprising given Trump’s views on energy policy. A climate change denier, Trump pulled the US out from the Paris Climate Deal and supported more oil and gas exploration in the US in his first tenure. He has also vowed to end the “EV mandate” and many analysts fear he could roll back the incentives that the Biden administration provided for EV transition.

Tesla Stock Rose After Trump’s Election

The rise in Tesla stock after Trump’s election is not all that hard to comprehend. The company’s CEO Elon Musk was among the biggest backers of Trump and might even land a position in his administration.

Meanwhile, Wall Street analysts – who are otherwise quite divided on Tesla – are getting incrementally bullish on the shares after Trump’s victory.

Wedbush believes that Tesla is a big winner from Trump’s presidency. In its note, the brokerage said, “The biggest positive from a Trump win would be for Tesla and Musk. We believe a Trump presidency would be an overall negative for the EV industry as likely the EV rebates/tax incentives get pulled, however for Tesla we see this as a huge positive.”

Wedbush analyst Dan Ives termed Trump’s victory a “dream scenario for any Tesla bull.” He added, “This could ultimately add $40 to $50 per share to Tesla’s stock right off the bat, and we could now be talking about a $1 trillion [or] $1.5 trillion market cap for Tesla.”

Notably, Tesla’s market cap peaked above $1.2 trillion in November 2021. It hasn’t able to reclaim its $1 trillion market cap.

Ives, a long-time Tesla bull said, “Ultimately, I think Tesla is the most undervalued AI name in the market.” He added, “This is just more and more going to unlock that opportunity for Tesla and Musk.”

Tesla is Also an AI Play

Notably, Tesla is working on the Optimus humanoid and autonomous driving which make it an AI play. Last month, it 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. The company also revealed that it would produce a bigger vehicle names Cybervan which would have the capacity to carry upto 20 people.

It also showcased the abilities of its Optimus humanoid. Musk said that the humanoid is doing some unspecified tasks in Tesla 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 you’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.

Meanwhile, while Tesla stock fell after the “We, Robot” event as the announcements failed to impress, it made up with its Q3 earnings.

TSLA Reported Better-Than-Expected Q3 Earnings

The company reported revenues of $25.2 billion in Q3 2024 which was 8% higher YoY but slightly short of the $25.4 billion that analysts were expecting. The company’s automotive revenues rose 2% YoY to $20.16 billion. The Energy segment’s revenues rose 52% YoY to $2.37 billion. Notably, the contribution of Tesla’s Energy segment has increased gradually as while the core automotive business has sagged, its energy sales have been buoyant.

The company’s Services and Other revenues also rose an impressive 29% to $27.9 billion. In its shareholder deck, Tesla said, “We also recognized our second-highest quarter of regulatory credit revenues as other OEMs are still behind on meeting emissions requirements.”

Legacy automakers have scaled back their once ambitious EV (electric vehicle) plans amid tepid demand and mounting losses and therefore have to spend money in buying regulatory credits from EV companies like Tesla.

Cybertruck Became the Best-Selling EV Pickup

Thanks to the $739 million revenue from selling automotive credits, Tesla was able to beat its Q3 EPS estimates quite easily and its adjusted EPS of 72 cents was well ahead of the 58 cents that analysts were expecting. While Tesla does not provide the breakdown for sales of its Cybertruck, it said that the pickup model achieved positive gross margin in the quarter. It also said that Cybertruck is now the third best selling electric model in the US – the first two on the list are its Model Y and Model 3 respectively.

Among other the Cybertruck competes with Ford’s F-150 whose ICE (internal combustion engine) model has been America’s best-selling pickup for decades. Rivian’s R1T also competes in the electric pickup market.

Tesla also reassured markets on its 2024 delivery outlook and emphasized, “Despite ongoing macroeconomic conditions, we expect to achieve slight growth in vehicle deliveries in 2024.” The EV maker’s deliveries fell YoY in the first two quarters of the year and while they did rise in Q3, its cumulative deliveries in the first nine months of the year are still lower than the corresponding period last year.

Tesla Expects Deliveries to Rise Sharply in 2025

During the earnings call, Musk was quite upbeat on the 2025 delivery outlook and said, “Something like 20% to 30% growth next year is my best guess.” While that guidance at midpoint is half of the 50% long-term delivery guidance that Musk once touted, its nonetheless encouraging considering the current state of the EV industry.

Meanwhile, Tesla shares are trading nearly 2% higher today after the steep rise yesterday. However, while analysts are getting bullish on the stock after Trump’s win it remains to be seen how the company actually benefits from a Trump presidency. On a similar note, a section of the market is apprehensive about Musk managing his time at his various companies in case of his involvement with the Trump administration.