Elon Musk, CEO of Tesla (NASDAQ: TSLA), has drawn investor optimism through his political connection to President-elect Donald Trump, prompting an increase in the company’s stock forecast.
Adam Jonas from Morgan Stanley (NYSE: MS) has updated his target for TSLA, suggesting a bullish scenario that could see the stock rise to $500 for the electric vehicle (EV) manufacturer.
In a note to investors on November 12, Jonas remarked that Musk’s endorsement of Trump has shifted investor sentiment regarding the EV maker.
“Elon Musk’s entry into the political sphere has expanded investor thinking around Tesla’s fundamental outlook,” Jonas stated.
This shift has sparked a 40% increase in stock value, pushing shares to a peak not seen in two years. Remarkably, this short-term surge has outstripped Morgan Stanley’s earlier price target of $310.
Jonas believes that Musk’s political involvement has widened investor outlook on Tesla’s potential impact in the U.S. renewable and autonomous sectors.
“With the current share price around $350 in intraday trading, TSLA shares are now trading at approximately 16x EV/EBITDA on our FY30 forecasts, up from around 11x last week. At $400, the stock would trade at 19x EV/EBITDA (FY30e), and a $500 price would bring the valuation just below 24x,” Jonas elaborated.
Increased Projections for TSLA Post-Trump Victory
Dan Ives of Wedbush Securities has also provided an optimistic forecast for Tesla in light of the Trump administration.
The analyst posits that advancements in artificial intelligence and autonomous technology are poised to flourish in the upcoming administration, markets that he estimates could represent a $1 trillion opportunity for Tesla. As a result, Ives has increased Tesla’s share price target from $300 to $400.
“We are raising our price target on Tesla to $400 from $300 as we believe the Trump White House win will be a game-changer for the autonomous and AI story for Tesla and Musk over the coming years. We estimate the AI/autonomous opportunity is worth $1 trillion alone for Tesla,” Ives stated.
As reported by Finbold, Ives emphasized that Tesla holds significant growth potential, leveraging its leadership in the EV market. He noted that Tesla will likely emerge relatively unscathed even if Trump decides to eliminate federal tax incentives for the EV industry.
Future Outlook for Tesla Stock
At the close of the last trading session, Tesla’s share price stood at $350, reflecting an almost 9% gain for the day. Over the past week, shares have surged more than 40%.
Notably, this ascent comes in the wake of Bank of America (NYSE: BAC) recently designating the $350 price point as a street-high.
As the trading session on November 12 approached, the stock showed signs of cooling, with a pre-market dip of 1.1%.
From a technical standpoint, an analysis by TrendSpider on November 12 indicated that TSLA may sustain its upward momentum, having established a bullish “cup” pattern.
The stock’s breakout from the prior $280-$290 resistance zone, where it faced challenges, indicates robust buying interest. Should this trend continue, TSLA might aim to test its previous high of $414.50.
The recent rally has also led to significant losses for short sellers, with approximately $7.8 billion lost since Trump’s election, and analysts caution that further losses may occur.
“We anticipate ongoing short covering in TSLA stock due to the rally-induced short squeeze, which will drive out many of the 2.4 million shares that were shorted over the past month,” said Ihor Dusaniwsky, managing director at S3 Partners.
In conclusion, while Tesla seems to be in a favorable position, investors should remain vigilant, particularly if the excitement surrounding Trump’s election diminishes. Furthermore, Tesla’s Q4 report will be of particular interest, especially in light of unsatisfactory sales in China in October.
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