That’s a substantial gap, particularly in light of the risks facing Tesla’s near-term performance. The Trump administration wants to cut federal subsidies for EVs, which will make the already expensive vehicles even pricier than gas-powered cars. About two-third of Tesla’s US sales, or about 20% of its global sales, benefit from the tax credit, Barclays analyst Dan Levy wrote in a note to clients this week. However, the move is likely to hurt the company’s smaller domestic competitors more, which could benefit Tesla by further consolidating its market position.
Betting on easing regulations is dicey, however, because it can take a while to get done. And even if it happens, there’s little indication that Tesla’s Cybercab is ready to hit the road. If anything, loosening the rules before Tesla’s technology gets where it needs to be risks benefiting Tesla’s chief robotaxi competitor, Alphabet Inc.’s Waymo.
“It is not regulation that is holding Tesla back when it comes to self-driving,” said Thomas Thornton, founder of Hedge Fund Telemetry.
Betting on Power
Theories about the parabolic rise of Tesla’s stock price abound on Wall Street. Investors want to bet on Musk’s growing power in Washington; the company’s massive following among retail traders is boosting the move. And Trump’s election win can transform the EV maker and offer massive future benefits.
“People who bet against Musk and Tesla have consistently been proven wrong,” said Cole Wilcox, portfolio manager at Longboard Asset Management. “There is nothing in his way that can prevent him from executing his visions now.”
In many ways, Tesla and Bitcoin have become the face of the post-election rally sparked by the return of animal spirits in markets.
Read more: Tesla Technicals in Focus as Momentum Takes Over: Taking Stock
“This rally is reminiscent of the moves we saw in 2020 and 2021, only this time the Tesla story has many more intangibles,” Interactive Brokers’ Sosnick said. The stock gained more than 740% in 2020, and then rose another 74% through Nov. 4, 2021 to set a new all-time high. The difference is those gains came as Tesla’s sales and profits were soaring, and the outlook for EV demand was bright.
But as the tech-mania of 2021 snapped amid fears about rising inflation and steep interest rates, Tesla shares retreated sharply. Then came the warnings of an unexpected slowdown in EV sales, and thinning profit margins, and the stock struggled to climb back to those prior highs. It set its first new record since 2021 after Trump was elected.
The options market tells a similar story. Tesla is such a favorite among derivatives traders that over the past month it has been the fifth largest equity options position in the US by notional volume, according to Rocky Fishman, founder of Asym 500. The top four are the S&P 500, the SPDR S&P 500 ETF Trust, the Invesco QQQ Trust Series 1 and the Nasdaq 100 Index.
“There is a dramatic reach for upside,” said Tom Keen, options trader at Piper Sandler. “And since owning call options on the stock has been working, people just keep doing that.”
As long as this kind of pattern holds, Tesla shares can keep rising. After all, its investors are no strangers to such rapid rallies. And with Musk having a role in the Trump administration, there’s no telling where the company ultimately ends up.
“The problem is that there’s only one public market play on Musk, and its symbol is TSLA,” DataTrek’s Colas said. “That makes it the focus of global investors, and valuation simply is not a consideration for many of them.”
