Tesla Stock Surges Back to Trillion-Dollar Club Following Trump Victory Boost
Tesla’s Stock Journey in 2024: A Roller Coaster Ride
Tesla’s stock has been a roller coaster in 2024, tumbling 43% for the year through April 22, but it is on a tear. Soaring through late October, shares surged 18% from the Oct. 23 close when Tesla reported a better-than-expected quarterly profit and gave solid guidance through Election Day. And now, the stock has received a 28% bump after Trump’s victory, largely due to Musk’s all-in support for the Republican candidate.
The sharp positive reaction in the stock is “more a reflection of Elon Musk’s prominent role within the Trump campaign, and likely a reminder of Tesla as the ‘original meme stock,’” Barclays analyst Dan Levy wrote in a note on Thursday.
It’s not clear if the victory will actually translate into any concrete benefit for the EV-maker, given that Trump is a conspicuous skeptic of electric vehicles. That hasn’t stopped the Tesla faithful.
Tesla’s call-option volume swelled to a one-day record on Friday as investors piled into bullish bets on the stock, with more than 4.7 million contracts trading. The implied volatility of calls spiked to the highest premium above puts since early 2021, creating a buying frenzy.
“The benefits to Tesla of a Trump win are not as obvious at first glance,” Barclays’ Levy added. “With EV policy potentially de-emphasized and possible elimination of EV purchase credits, it would be negative to Tesla’s US vehicle sales.”
But the meme-stock-like move may not be over yet. While Tesla’s comeback has been dramatic, the shares are only just now catching up with the broader S&P 500 this year. Before the Trump-fueled gains, it was the worst performer among the so-called Magnificent Seven mega tech companies. Some investors see this as a sign that the stock has room to play catch-up before the end of the year.
Setting aside the recent surge, however, it’s tough to see why Tesla shares will climb much higher, according to some Wall Street pros. Its profits for the year are forecasted to decline 23%, making it the only Magnificent Seven company to show a decline.
Besides, its effort at becoming an artificial intelligence powerhouse—the main premise on which its massive valuation rests—is still a long way from being certain, especially after its self-driving vehicle failed to rouse much enthusiasm following its unveiling in October.
Tesla’s shares trade at a multiple of about 102 times forward earnings. For comparison, AI-darling Nvidia—whose stock has also risen stratospherically over the past two years—trades at a multiple of roughly 39 times.
“It is way too early to decide on any material benefits for Tesla outside of hopes from the Trump win,” said David Mazza, chief executive officer of Roundhill Financial. “This is just the latest manifestation of the Tesla ‘dream premium’ playing out.”