EV maker Tesla has been through its ups and downs, but has consistently defied expectations and some analysts now predict that its market cap could hit $2 trillion by 2025. It is hard to tell whether this is achievable, but Tesla has performed rather well recently.
In the past year, its stock has risen 45% re-joining the $1 trillion club, and in the past month alone it has climbed an impressive 55%. Amid the stock’s spectacular rise, Bank of America analyst John Murphy maintained his buy rating on the company while raising his price target to $350. Dan Ives also maintained a buy rating on the stock and a $300 target, but analysts expect he would raise it further.
But what are the factors behind this optimism, considering the overall waning interest in EVs and the competition from cheap Chinese EVs?
The Trump Card
The past month’s impressive rally of Tesla was mainly driven by investor optimism about the benefits Elon Musk could reap from his close ties to the president-elect Donald Trump.
The friendship, if it lasts, could pave the way for regulatory advantages, especially with the reported push for easing self-driving regulations. This could accelerate Tesla’s robotaxi rollout and bolster its dominance in autonomous vehicle technology whose market opportunity, according to some analysts, could reach $11 trillion in 2026. If regulatory barriers are eased under the Trump administration, Tesla could scale this service rapidly, adding a significant revenue stream.
Another factor is the most likely removal of the tax incentives for EVs under the Trump administration. Generally perceived as a threat, this would affect the various EV makers in different ways, with Tesla being in the most advantageous position. Its cost advantage over its peers and its already-profitable operating business would be insulating the company from this key headwinds. Furthermore, it could bolster its leading market position as competition falls by the wayside.
And let’s not forget the tariffs promised by Trump. Most likely, they will make the cheap Chinese EVs not so cheap.
Other factors
EV Leadership: In addition to the benefits the company could reap from the Musk-Trump bromance, Tesla’s brand remains synonymous with electric vehicles. Despite increasing competition, the company continues to lead in global EV sales, fueled by the popularity of its flagship Model 3 and Model Y. It is attracting a loyal customer base and its vehicles are seen as status symbols and trendsetters in design and technology.
Energy and Innovation: Beyond cars, Tesla’s innovations in energy storage and solar solutions, such as the Powerwall home energy storage and solar panels, create a cohesive ecosystem and have positioned it as a pioneer in clean energy. The company’s recent moves to expand its battery production and energy storage capabilities further solidify its standing.
The bottom line
Tesla’s long-term revenue projections remain positive, with an expected growth rate of nearly 16% in 2025. The company continues to lead in both EV production and energy solutions, though market volatility and policy shifts will likely shape its performance moving forward. Tesla’s future hinges on its ability to capitalise on these opportunities while mitigating risks, making it a stock to watch amid evolving U.S. policies.
Whether its market capitalisation will reach $2 trillion, remains to be seen.
Risk warning:
This article is for information purposes only. It does not post a buy or sell recommendation for any of the financial instruments herein analysed.
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