Trump’s Win Could Propel Tesla to New Heights in 2025
Zacks clients who follow my work in the Technology Innovators service know that we have been bullish on Zacks Rank #1 (Strong Buy) stock Tesla (TSLA) for a while now (we are up more than 100% in the name currently). In my last “Bull of the Day” article, I also wrote about the stock. However, as I have dug further into the story, I am becoming more bullish, and, in my view, those who missed out on the move so far should not fret as 2025 will likely be a breakout year for the company. Below are the top three ways the Trump victory will be bullish for Tesla in 2025:
1. Trump’s Deregulation Policies Favor Tesla
CEO Elon Musk is wagering on a future for Tesla centered around autonomous driving and robotaxis. Currently, Alphabet’s (GOOGL) leads the race for robotaxi dominance. Even though Tesla’s “Full Self Driving” (FSD) requires human oversight, Waymo’s robotaxis are operational in four cities: Phoenix, Arizona; Los Angeles; San Francisco; and Austin. Despite this, the robotaxi development phase appears to be just beginning.
Recently, the Trump administration pledged to reduce regulations on autonomous vehicles, which is crucial for Tesla. Stricter regulations have previously hindered Tesla from launching its long-awaited robotaxis. Additionally, Sean Duffy, Trump’s nominee for Secretary of Transportation, has a positive stance on autonomous vehicle technology, suggesting it could enhance safety for families and children.
2. Elimination of EV Credits Could Hurt Rivals
Last week, TSLA shares dropped nearly 6% after the Trump team announced plans to phase out the generous electric vehicle (EV) tax credits established under the Biden administration. These credits, part of the Inflation Reduction Act (IRA), had provided up to $7,500 for qualifying new electric vehicles.
Although TSLA shares fell, this may have been a corrective move after a 29% surge following the presidential election results. The end of tax credits is likely to hurt lower-margin EV competitors more significantly. For example, Rivian (RIVN) currently has negative profit margins. In contrast, traditional carmakers like Ford Motor (F) operate with mere 1.93% profit margins, while Tesla enjoys margins close to 9%. This change will pressure competitors, possibly steering them away from higher-margin fossil fuel vehicles.
3. Tariffs May Shield Tesla from Foreign Rivals
President-elect Trump has also indicated a commitment to impose tariffs to correct trade imbalances, especially against foreign nations that implement tariffs on U.S. goods. These policies could provide an advantage for Tesla, creating barriers for Chinese competitors like Nio (NIO) trying to penetrate the U.S. market.
Tesla’s Gross Profit Keeps Climbing
Tesla’s gross profits are on the rise, fueled by soaring Cybertruck sales and a booming energy generation and storage sector, which is growing at a compound annual growth rate (CAGR) of approximately 120% annually.
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Remarkable Options Activity
Joe Kunkle of OptionsHawk (@OptionsHawk) recently highlighted significant options activity, with a high-rolling investor purchasing $33 million in December $370 calls. Such call buying is noteworthy and merits attention.
On the Path to a Significant Breakout
Tesla is emerging from a substantial long-term base structure, suggesting that its previous all-time highs may serve as an attraction point as we approach 2025.
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Conclusion
As the leader in the electric vehicle sector, Tesla is seeing a resurgence. Donald Trump’s recent election win stands to further energize the stock in 2025.
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Ford Motor Company (F) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
