Investing

Can Tesla Stay Above the $1 Trillion Threshold In 2025?

Chris MacDonald

Published: November 21, 2024 8:37 am

Last Updated: November 21, 2024 8:39 am

Tesla (NASDAQ:TSLA) is a top tech company which really doesn’t need much in the way of an introduction. The U.S. EV maker has recently rejoined the $1 trillion market cap club after a 23% surge in stock price following Donald Trump’s election win. This rally has continued, with the company’s stock price surging above the $345 per share level at the time of writing. By the time you’re reading this article, that number could be even higher, given this stock’s momentum.

This move has certainly been a sharp reversal for Tesla, which was previously down on the year ahead of the election. However, as the company’s CEO Elon Musk has cozied up to now president elect Donald Trump, investors are clearly pricing in a different calculus for the company’s core businesses and its future earnings potential.

As a result of this move, Elon Musk has reinforced his position as the wealthiest person in the world, with his net worth growing to a whopping $300 billion. This ride has been incredible, but with a valuation that’s just above the $1 trillion threshold, the question is whether Tesla can hold this valuation throughout 2025, and potentially head toward the next key hurdle (a $2 trillion valuation).

Let’s dive in.

Key Points About This Article:

• Tesla is once again a member of the trillion-dollar market capitalization club after an impressive post-election surge.
• The question many investors have is whether the company can maintain this valuation, or if market headwinds could derail this narrative next year.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Tesla’s Surging, And Doing So Quickly

Elon Musk supported Cathie Wood’s $2,600 price target for Tesla, which forecasts an $8 trillion market value by 2029. That’s no surprise, as Cathie Wood has been among the most vocal supporters of Tesla (and directionally correct with previous price targets which looked crazy at the time).

Now, this price target does price in substantial growth for the company’s underlying car business, which she argues should be worth around $1 trillion. But the majority of this valuation is tied to autonomous driving, where Wood sees a potential $5 trillion opportunity. And with Donald Trump now at the helm of the country, perhaps this vision can be realized by 2029. After all, regulatory headwinds have burdened the company in its goal of becoming the future robotaxi/ride-sharing king of the roads. If Trump can push regulators to approve full self driving robotaxis, this stock is likely to trend higher as analysts and investors try to model out the potential impact.

I do think Wood’s calculations are certainly up for debate, and there’s a reason why the company is valued closer to $1 trillion than the $8 trillion she’s banking on. But with other businesses like Optimus potentially leading to some revenue and earnings growth over time, who knows. Many have been wrong on Tesla in the past (myself included), so I’m not going to make any assertions that this isn’t within the realm of possibility (though I’d still assign a low likelihood of Optimus amounting to much).

The post-election tailwinds for Tesla appear strong, and this is a stock with serious momentum right now. That’s not up for debate. The question is how long this rally will last, and at what level the stock may see some consolidation from here.

Trump’s Influence Could Be Immense

Musk’s strong support for Donald Trump’s second presidential campaign, including a $119 million donation, has amplified his influence in securing favorable government treatment for his companies. Elon Musk’s political efforts aim to shield his businesses from regulation and increase government backing, as revealed by sources within his companies and government officials familiar with his dealings. This strategy leverages Musk’s growing relationship with Trump for business advantage.

Musk’s political alliance with President-elect Donald Trump could accelerate his vision for fully autonomous vehicles. Despite safety concerns and investigations, Musk believes self-driving cars are key to Tesla’s value. He recently unveiled plans for the Tesla Cybercab, a $30,000 vehicle without a steering wheel, set to launch in the coming years.

We’ll have to see if Donald Trump’s administration will be as friendly to Tesla as many in the market seem to believe he will. It’s worth noting that many political pundits have attributed Trump’s win in part to Musk’s support, and the support of other influential celebrities and influencers. Favors will likely be dealt out, though there is a regulatory and legal framework that will need to be addressed for these autonomous vehicles to hit the road. We’ll have to see what the ultimate timeline for approval may be, but the market has clearly pushed forward their expectations on this front.

Is Tesla Stock a Buy?

I’ve personally been very skeptical of Tesla in the past, and in particular, the company’s valuation. Now trading at roughly 12-times sales and more than 100-times forward earnings, Tesla stock isn’t cheap, by any stretch of the imagination. Compared to itself, and its peers, this is a stock that has plenty of exuberance baked in at the moment. On that basis alone, I do think there’s reason for pause when it comes to considering buying Tesla stock after this rally.

Now, the company has reported stronger results in the third quarter, posting revenue of more than $25 billion which was up 8% year-over-year. Additionally, the company’s margins improved, and its production capacity could result in the company delivering up to 3 million vehicles per year, if market dynamics shift toward Tesla as many bulls expect.

In such a bullish scenario, it’s entirely possible Tesla could maintain its $1 trillion valuation and potentially push higher. If robotaxis are eventually approved, and other lines of business contribute a greater deal to the company’s bottom line, then potentially this stock is undervalued. It really depends on whether the company’s ambitious goals can be achieved. Given Elon Musk’s lack of ability to stick to his pre-set deadlines, I’m still skeptical on this front as well.

Personally, Tesla looks like a stock that’s probably got plenty of future growth priced in right now. This is one I’d be cautious with, but investors have been wrong to bet against the stock. Truth be told, I have no idea which way this stock will trend, but I do expect volatility ahead.