Bull of the Day: Tesla (TSLA)

Trump is Bullish for Tesla

Zacks clients who follow my work in the Technology Innovators service know that we have been bullish on Zacks Rank #1 (Strong Buy) stock Tesla (TSLA) for a while now (we are up more than 100% in the name currently). In my last “Bull of the Day” article, I also wrote about the stock. However, as I have dug further into the story, I am becoming more bullish, and, in my view, those who missed out on the move so far should not fret as 2025 will likely be a breakout year for the company. Below are the top three ways the Trump victory will be bullish for Tesla in 2025:

1. Trump Deregulation Plans are Bullish for Tesla

CEO Elon Musk has said that he is betting Tesla’s future on autonomous driving and robotaxis. Thus far, Alphabet’s (GOOGLE) is winning the battle for robotaxi supremacy. While Tesla’s “Full Self Driving” (FSD) still requires a human to be behind the wheel, Waymo’s robotaxis are live in four cities: Phoenix, Arizona, Los Angeles, San Fransisco, and Austin. While Waymo may win the battle, the robotaxi buildout is in the early innings.

Earlier this week, the Trump team promised to cut back regulations on autonomous driving. The news is huge for Tesla because strict regulations have prevented Tesla from rolling out its delayed (and highly anticipated) robotaxis. Further, Sean Duffy, who Trump named as his pick for Secretary of Transportation, is another bullish signal for the stock. In 2018 remarks, Duffy said that AV “technology can be remarkable in keeping our families and kids safe.”

2. EV Credit Roll Back Will Crush the Competition

Last week, TSLA shares dumped nearly 6% after the Trump team announced they would sunset the generous electric vehicle (EV) tax credits provided by the outgoing Biden administration. The EV credits, part of the Inflation Reduction Act (IRA), provided tax credits of up to $7,500 for “qualified, new, clean vehicles.”

Although TSLA shares sold off on the EV tax credit sunset news, they were likely searching for a reason to after the 29% explosion following the US presidential results. The news is stealthy bullish for Tesla because the tax credit removal will have more of an impact on low-margin EV competitors. For instance, EV pure play Rivian (RIVN) you have negative profit margins. Further, traditional automakers like Ford Motor (F) have profit margins of just 1.93%, while Tesla enjoys margins of nearly 9%. In other words, competitor profit margins will be squeezed, and legacy automakers will be forced to focus on higher-margin cars that run on fossil fuels.

3. Trump to Levy Tariffs

Another core tenant of the “Trump doctrine” is using tariffs to equalize America’s many trade imbalances. President-elect Donald Trump has promised to levy equal tariffs on foreign countries that levy tariffs on the US and threaten American jobs. These protectionist policies will work in Tesla’s favor, keeping Chinese competition like Nio (NIO) from entering the US market.

Tesla Gross Profit Continues to Expand

Tesla’s gross profits are expanding and will continue on that trajectory. Cybertruck sales have been through the roof and revenue from its energy generation and storage business is emerging at a compound annual growth rate (CAGR) of ~120% annually.

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Heavy & Unusual Call Flow

Joe Kunkle of OptionsHawk (@OptionsHawk) pointed out that a deep-pocketed options player bought $33 million worth of December $370 calls. Call buying of this magnitude is always worth watching.

Long-Term Breakout

Tesla is emerging from a massive long-term base structure, which suggests that the previous all-time highs are likely to be a magnet into 2025.

Image Source: Zacks Investment Research

Bottom Line

EV king Tesla has returned to glory. However, Donald Trump’s election victory is likely to inject even more life into the stock in 2025.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.