Tesla (NASDAQ: TSLA) shares were heading for an underwhelming 2024 until the final third of the year. In fact, just three months ago the Tesla share price was roughly where it was four years prior.
Then it accelerated like one of the company’s electric vehicles (EVs), rising 81% to reach $394. This means a £20,000 investment made three months ago would now be worth approximately £36,200!
And with a market cap of $1.24trn, Tesla is again worth more than Toyota, BYD, NIO, Hyundai, Stellantis, Ford, and General Motors combined.
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The Trump card
Tesla stock enjoyed a big boost after Donald Trump’s election victory in November. The assumption is that the incoming administration will cut corporate taxes, regulations, and prevent cheap Chinese-made EVs from flooding the US.
All of this could benefit Tesla, as could CEO Elon Musk’s close relationship with Trump. Specifically, red tape might be cut around self-driving vehicles, which could lead to an accelerated rollout of the company’s robotaxis (or Cybercabs, as Tesla calls them).
Setting a high bar
We won’t get Q4 results until later this month. But in Q3, Musk said he’s confident the Cybercab will not just start production in 2026, but reach “substantial” volume production. The aim is to ramp up to 2m units per year.
When it was finally unveiled in October, Tesla’s Cybercab had no steering wheel or brake and accelerator pedals. The company plans a ride-hailing network, which would presumably be a high-margin business given that there would be no human drivers that need paying.
Meanwhile, Musk is predicting 20%-30% vehicle growth this year. That’s a high bar, considering interest rates are still high and the firm’s growth has stalled. Last year, it delivered 1.79m cars, a 1% drop from 2023.
Where next?
The current period is a bit of a strange one for Tesla. The once-hot EV market has hit a major speedbump, while the company’s next-generation products (robotaxis, full self-driving software, and humanoid robots) aren’t ready yet. Consequently, Musk has said Tesla is “between two major growth waves“.
Given this, it’s somewhat surprising that the stock’s price-to-earnings (P/E) ratio is above 100. This extreme valuation has been reached despite the likelihood that Trump will scrap the $7,500 tax credit for new EV purchases.
Admittedly, this cancellation might benefit Tesla in the short term as US consumers rush to take advantage of the credit before it disappears. But it surely can’t be positive for overall sales after that.
Consequently, I see 2025 as a potentially more challenging year for Tesla and its share price.
Staying on the sidelines
I’ve owned Tesla stock a couple of times over the past few years. In hindsight, I would have done splendidly if I’d just held it through thick and thin.
However, that’s easier said than done. It’s incredibly volatile and can often look ridiculously overvalued.
Meanwhile, Musk continues his quest to eliminate what he calls the “woke mind virus“, which he sees as a threat to Western civilisation. Politics aside, I fear the forthright manner in which he’s pursuing this could damage the Tesla brand and alienate many potential future EV customers.
I have great admiration for Tesla as a company. But due to the sky-high valuation, I have no plans to reinvest right now.
