Tesla’s Bright Future: How Trump’s Leadership Could Shape the Electric Vehicle Giant
Tesla (NASDAQ: TSLA), known for its remarkable 1,700% surge in stock price over the past decade, has created plenty of wealth, including for its CEO, Elon Musk, who is currently the richest person in the world. With Donald Trump winning the recent presidential election, there’s been renewed optimism in the market. Let’s explore how this new administration might impact Tesla’s potential for generating millionaires.
Impact of Trump’s Victory
Elon Musk played a significant role in Trump’s 2024 presidential campaign, reportedly investing about $200 million through the America PAC, aimed at low-propensity voters. As a result, the market appears to link Musk’s backing of Trump with positive expectations for Tesla’s financial future.
Currently, Tesla’s stock has increased nearly 40% since the election, elevating its market capitalization to $1.1 trillion, resulting in a $70 billion boost to Musk’s wealth. However, investors joining the fray should not be swayed by speculation; it is vital to consider how a Trump administration could fundamentally influence Tesla.
Trump’s proposed business-friendly policies, including reducing the corporate tax rate from 21% to 15%, sound promising. Yet, these benefits might only apply to companies manufacturing in the U.S. It’s uncertain whether Tesla can qualify, given its operations across both the U.S. and China.
Moreover, Trump’s protectionist views may conflict with Tesla’s plans to shift more production to Mexico to lower costs amid rising competition in the electric vehicle market. His tough stance on China could also increase risks for Tesla and other American companies operating in that key market.
Revival of Investor Sentiment
While the election results might not immediately benefit Tesla economically, they could mitigate the perception of political scrutiny faced by the company and Musk during the Biden era. This concern grew when Tesla was absent from the 2021 EV Summit in Washington, D.C.
Additionally, in October, SpaceX, another Musk-led firm, faced legal challenges against California officials, who reportedly cited Musk’s political views in denying its permit to launch more rockets.
With Trump in office, investors may feel greater optimism that Tesla will be free to pursue innovative growth avenues like generative artificial intelligence and self-driving technologies. Achieving these advancements requires significant governmental support, especially as Tesla’s core EV operations reach maturity.
Image source: Getty Images.
Tesla’s recent third-quarter earnings report underscores the urgency for expansion: total revenue grew by just 8% year over year to $25.2 billion, with automotive sales increasing a mere 2%.
Is Tesla Still a Path to Wealth?
Removing distractions reveals that Tesla may now represent a more established electric automaker, facing challenges with stagnation in its core EV business. Trump’s presidency likely won’t drastically alter this trend. Furthermore, with a forward price-to-earnings (P/E) ratio of 105, Tesla’s valuation appears extremely high relative to its current situation.
However, Tesla isn’t an ordinary company. Its shares have often commanded high premiums due to the trust investors place in Elon Musk’s vision and capabilities. A supportive administration could provide Musk with the freedom he needs to fulfill his ambitious plans.
While Tesla remains capable of generating wealth for investors, it may be wise to wait for advances in its self-driving technology before making investment decisions.
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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
