Tesla’s (TSLA) eye-watering post-election rally may soon resume.
The stock, which has rocketed a staggering 65% since Nov. 5, has taken a breather in recent weeks, as worry over slowing demand trends and a rollback of pro-EV policies raised fears of near-term financial performance.
Tesla shares fell 4% during President Trump’s first week back in office, contributing to a one-month decline of 12%.
Despite the recent dip, many analysts remain confident in the company heading into its critical fourth quarter earnings report. Rather than focusing on Tesla’s first annual sales decline in over a decade, they’re becoming increasingly optimistic about Tesla’s AI potential.
Analysts at Piper Sandler and Wedbush were among the teams raising their 12-month price targets this week, with Piper Sandler naming Tesla its top “buy-and-hold idea” and Wedbush calling the new administration a “total game changer” for the company.
“The $7,500 credit rollback is more of a negative for new entrants and Detroit’s big three automakers,” Ives told me on Yahoo Finance’s Morning Brief. “For Tesla, 90% of what’s going to drive the stock is autonomous and AI … that’s the ultimate story.”
Ives predicts Tesla’s valuation will reach $2 trillion by the end of this year, driven by what he described as a “regulatory friendly” White House that will “fast-track the autonomous future.”
Morgan Stanley’s Adam Jonas also sees AI as a key growth driver for Tesla. In a recent note to investors, the Tesla bull wrote that AI and robotics have become top of mind for clients following Nvidia CEO Jensen Huang’s CES presentation. The AI chip juggernaut announced a partnership with Toyota for autonomous vehicles and another deal with automotive company Continental and self-driving truck firm Aurora.
However, Jonas has not yet priced embodied AI into his value modeling for Tesla.
“We are receiving more incoming client requests to discuss humanoids than the entirety of our auto OEM, dealer and supplier coverage combined … While we continue to view Tesla as sort of an embodied AI ‘ETF’ and well positioned due to the underpinnings of our DREAMS framework, we note that we do not currently ascribe any value to Tesla for embodied AI in our $430 price target or $800 bull case,” Jonas wrote in a note to clients.
Jonas also sees the Trump administration’s tariff policies as a potential catalyst for the company. He views Trump’s aggressive use of tariffs as a push to accelerate onshoring of AI-enabled technology, a move that could create future growth opportunities for Tesla.
“We expect to see the Trump Administration’s EV and AV policies encouraging new domestic supply of critical technologies and supporting manufacturing and supply base,” Jonas wrote. “In our view, Tesla’s role in helping to ‘fill the void’ of next-gen manufacturing and supply chain will be an increasingly consequential driver of growth and shareholder value.”
And it’s the AI narrative that sets Tesla apart from the rest of the automakers. Traditional automakers, for comparison, are facing a different reality as President Trump’s threat of tariffs on Mexico and Canada weigh on stock performance. Shares of General Motors (GM) have climbed just 6% post-election, while Ford (F) and Stellantis (STLA) have declined 1% and 2%, respectively.
According to RBC analysis, General Motors is most exposed to looming tariffs, given that Mexico production accounts for about 35% of US sales, followed by Stellantis and Ford.
As the debate over whether Tesla can meet Wall Street’s lofty expectations under President Trump continues, the company is set to face its first major test this week. Tesla is scheduled to release fourth quarter results on Wednesday after the market close.
Seana Smith is an anchor at Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Tips on deals, mergers, activist situations, or anything else? Email seanasmith@yahooinc.com.
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