By After a difficult start to the year sent Tesla stock into a tailspin, the stars have aligned in the fourth quarter to send the shares soaring past the rest of the mega-cap Magnificent Seven.
A lot has been going right for Tesla in recent months, and the stock is approaching all-time highs, up 68% since its October “Robotaxi” event.
Meanwhile, the next best-performing “Magnificent 7” stock in the same time is Amazon, which is up about 21%, followed by Alphabet, which is up 14%. Tesla’s gains have handily beaten the Nasdaq 100, which is up about 6%.
The sharp outperformance in the EV maker's stock reflects a change in Tesla's—and Elon Musk's—fortunes, as the outlook for the company improves after a dismal few quarters, and as Musk deepens his ties to President-elect Donald Trump.
And the stock may have plenty of room for more upside.
"There are 5 companies with a market cap over $2T - Apple, Amazon, Google, Microsoft, and Nvidia - and I believe Tesla, with a $1.3T market cap, is arguably the most innovative company of them all. In other words, I believe Tesla's market cap has plenty of room to grow," DeepWater Management's Gene Munster said on X on Tuesday.
Tesla investors have been receptive to Musk's grand ambitions for a robotaxi network, while Musk's massive political bet on President-elect Donald Trump appears to be paying off. The company's auto competitors, meanwhile, look slightly less threatening than they did earlier in the year.
Here's everything that's been going right for Tesla as 2024 winds down.
- Musk's Mar-a-Lago residence
Musk bet big on Donald Trump via massive political donations and vocal support online and along the campaign trail.
His efforts were quickly rewarded.
Trump appointed Musk as co-head of the newly formed Department of Government Efficiency, and Musk has been spotted with Trump at Mar-a-Lago multiple times.
Markets have debated just how much the relationship might benefit Musk and Telsa, but more and more, investors see it as only bullish.
"Much of the recent exuberance stems from Elon Musk's bromance with President Trump," Yardeni Research said in a Tuesday note, referring to the stock's recent gains.
Musk seems to have the ear of President-elect Trump, and that could ultimately translate into policies that benefit Musk's businesses.
After Trump's election win, reports surfaced that self-driving car rules could be eased during Trump's second term, paving the way for the sale of vehicles without steering wheels or foot pedals, similar to the Robotaxi car unveiled by Tesla in October.
Following the election, Wedbush Strategies analyst Dan Ives upped his price target for the stock, describing Trump's win as a game changer, particularly as it relates to easing regulation that could fast-track autonomous driving ambitions.
It was also reported shortly after the election that Trump's transition team would look to end the EV tax credit. While that would impact Tesla, the company is said to be in favor, believing that ending the incentive would hurt competitors like Rivian and Lucid more.
- A return to sales growth
2024 proved to be a tough year for sales growth for Tesla, with the company on track to deliver about as many vehicles this year as it did in 2023.
The sudden halt in sales growth for a company that previously projected a long-term annual vehicle sales growth rate of about 50%, pressured the stock during the first half of the year.
However, a recent projection from Musk suggests that the company should see a sharp bounceback in sales in 2025.
During Tesla's third-quarter earnings call, Musk projected that the company would grow vehicle sales by 30%.
If Tesla is able to hit that goal, it would stand to deliver as many as 2.3 million vehicles next year. Such a sharp return to growth could get investors excited again and back up the company's premium valuation.
- Trump's proposed tariffs could benefit Tesla
While markets fear a trade war under Trump could hurt the broader stock market, investors see tariffs potentially boosting Tesla over its foreign competitors.
Much of Tesla's manufacturing takes place in the US, which means duties on imports could ultimately benefit Tesla's vehicle sales in America by targeting foreign EVs, specifically vehicles from China.
If tariffs are enacted, they would make the vehicles more expensive for American buyers compared to Tesla cars, giving Elon Musk's company an edge.
"US and EU tariffs on China's EV exports are just one tangible outcome that should support the company's growth expectations," Yardeni Research said.
- GM exits the robotaxi business
General Motors said on Tuesday that it would scale back its ambitions for a robotaxi network via its self-driving Cruise subsidiary.
General Motor's CEO Mary Barra previously envisioned the robotaxi unit generating $50 billion in revenue for the company by 2030.
Instead, General Motors will not integrate Cruise self-driving technology into future vehicles and has ditched plans for launching a fully autonomous robotaxi network.
According to Deepwater's Gene Munster, that's a win for Tesla.
"This is further evidence that the robotaxi market will be winner take most. The likely winners are Tesla and Waymo," Munster said on X.
This is important because much of Tesla's premium valuation hinges on its robotaxi ambitions. So, any progress made by Tesla on this front, especially relative to competitors, could help solidify its premium valuation.
"We also believe the stock could remain at a higher multiple to reflect the long-term opportunity tied to FSD/robotics given broader market interest in potential AI beneficiaries," Goldman Sachs said of Tesla in a note on Tuesday.
