Tesla (TSLA) stock rallied hard on the price charts following the electric vehicle (EV) maker's blowout earnings last month, rising more than 25% from October 23 to October 25. However, shares have been in a downtrend ever since – currently headed toward a six-day losing streak – which could be due to CEO Elon Musk actively participating in the Republican presidential campaign.
Musk has been campaigning for former President Donald Trump and formed the America PAC to support values that the two agree on, including secure borders, sensible spending and free speech. Trump has stated that if he is re-elected, he will create a government efficiency commission dedicated to sensible spending and it will be led by Musk.
However, while Musk and Trump align on many major issues, there are question marks surrounding how a Trump presidency would impact Tesla.
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"We believe a Trump presidency would be an overall negative for the EV industry as likely the EV rebates and tax incentives get pulled," says Wedbush Daniel Ives. But for Tesla, Ives sees a Trump win as a potential positive with some caveats.
"Tesla has the scale and scope that is unmatched in the EV industry, and this dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled with likely higher China tariffs that would continue to push away cheaper Chinese EV players from flooding the U.S. market over the coming years," Ives notes.
In the case of a Harris win, Ives expects the EV tax credits will remain in place "and ultimately increased in 2025 as the goal to get more U.S. consumers towards EVs would be a laser focus in a Harris administration."
Wedbush has an Outperform (Buy) rating and $300 price target on TSLA stock.
Is Tesla stock a buy, sell or hold?
Tesla's latest losing streak has the shares trading in negative territory for the year to date and Wall Street is staying on the sidelines when it comes to the Magnificent 7 stock.
According to S&P Global Market Intelligence, the average analyst target price for TSLA stock is $222.68, representing a discount of more than 9% to current levels. Meanwhile, the consensus recommendation is a Hold.
Financial services firm CFRA Research has a Hold rating on Tesla, but raised its price target to $265 from $225 following its third-quarter earnings results.
"We raise our target in the aftermath of the company's Q3 earnings release and conference call, recognizing the willingness of investors to pay higher multiples for TSLA shares due to increased excitement related to the company's longer-term growth prospects," said CFRA Research analyst Garrett Nelson in an October 28 note.
The consumer discretionary stock's valuation has always been a pain point for analysts, Nelson says, with "bears arguing that the stock has been unjustifiably overvalued relative to auto industry peers for many years. We have long argued that TSLA should instead be valued as a 21st century, sustainable transportation, energy, and technology company and therefore valuation is more arbitrary."
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