Tesla shares rose to a historic high on Wednesday, beating the electric car maker’s previous record from 2021, which was set after the post-election rush and renewed Wall Street enthusiasm for Elon Musk’s electric vehicle empire. This is due to the fact that stock hit a closing price of $424.77 more than doubling its previous peak of $409.97 on November 4, 2021.
The electric car company’s 71% gain this year has been propelled more by the optimism generated with Donald Trump’s victory during the elections than its early performance woes.
Record-Breaking Stock Surge For Tesla
Tesla’s stock price rallied 38% in November, the best monthly performance since January 2023 and its 10th best month on record. The surge in Tesla’s market capitalization was fueled by investor optimism over Trump’s victory early last month, which has dramatically influenced the trajectory of the company’s stock.
This increase in share value has surprised investors, especially since Tesla was off to a rocky start for the year. With a 29% loss in the first quarter of 2024, Tesla’s shares have bounced back considerably, recovering from their worst performance in over a year.
The rise in Tesla’s shares has been termed as the “Trump bump” by many analysts. As Craig Irwin, an analyst of Roth MKM, had commented on CNBC’s Squawk on the Street, that “Musk’s genuine backing for Trump likely doubled the pool of enthusiasts and heightened credibility for an inflection in demand.” Irwin raised his price target of Tesla to $380 versus $85, after winning the election by Trump.
Musk’s active involvement in Trump’s campaign and post-election strategies has further solidified the link between the two figures. In the lead-up to the election, Musk reportedly invested $277 million into pro-Trump efforts, focusing on swing-state operations aimed at voter registration. Additionally, Musk’s social media platform, X, became a vehicle for promoting Trump’s candidacy and further galvanizing Tesla’s support base.
Musk’s Expanding Influence And Role Of AI
Elon Musk‘s influence does not seem to be dissipating anytime soon, especially after President Trump’s election win and his appointment as an adviser in the new administration. “Department of Government Efficiency,” led by former Republican presidential candidate Vivek Ramaswamy, will supposedly be headed by Musk himself. This influential position is likely to give Musk leeway to oversee federal agency budgets, staffing, as well as push for the end of regulations that would really hinder Tesla’s growth.
Musk’s position may affect Tesla significantly, especially on the technological advancement of its autonomous vehicles. A long-time advocate for autonomous driving, Musk shared in a Tesla earnings call last October his plan to use his political power to “get federal approval process for autonomous vehicles” and bypassing the state-by-state level approval system.
Wall Street’s Brighter Future Ahead For Tesla
Analysts have been growing more bullish on the prospects of Tesla as it continues its upward trajectory. Goldman Sachs upgraded its price target for Tesla, and the list of financial institutions that have upgraded their outlook on the stock continues to grow. In its report, Goldman analysts cited the market’s forward-looking approach towards Tesla, particularly with regard to its artificial intelligence (AI) initiatives.
Other investment firms such as Morgan Stanley and Bank of America also released positive reports about Tesla, noting the company’s ability to cash in on newer technologies such as AI and autonomous driving. These positive reports have been strengthening investor sentiment, further fueling a price hike of the stock.
Despite the dismal first half of 2024, Tesla’s third-quarter earnings report in October reported that revenue was up 8% year-over-year, narrowly missing analysts’ expectations, but the company did blow past profit estimates. Even more encouraging was Musk’s forecast for 2025: a 20% to 30% rate of vehicle growth, underpinned by “lower-cost vehicles” and the start of autonomy.
Musk’s forecast was more positive than analysts had expected, which reflects a level of confidence in Tesla’s ability to adapt and thrive in an increasingly competitive market. As Tesla continues its journey in the electric vehicle sector, it will be interesting to see how the company will leverage its recent stock surge and the growing interest in emerging automotive technologies.
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