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Tesla's stock regains popularity as investors expect its Robotaxi and FSD technology to drive another phase of growth acceleration. The stunning performance drove Tesla's Price-to-Earnings(P/E) ratio to 103, the highest among the big seven stocks. Tesla is the biggest beneficiary of Trump's victory in the US election among the Magnificent Seven stocks, thanks to Elon Musk's dedication to supporting the president-elect in his campaign.
The electric car maker's shares experienced a staggering 69% rally to a record high in just over a month, adding $55bn (€53bn) to its market valuation, now standing at $1.35tn (€1.29tn).
Year-to-date, Tesla’s stock is up 57%, in contrast to a negative return before the election. Tesla's stock regains popularity as investors expect its Robotaxi and FSD technology to drive another phase of growth acceleration. The stunning performance drove Tesla's Price-to-Earnings(P/E) ratio to 103, the highest among the big seven stocks.
The artificial intelligence king, Nvidia’s P/E ratio stands only half of it at 54. At the moment, Tesla's FSD cars are not fully autonomous and require driver supervision. The company earlier unveiled Cybercab and Robovan vehicles "designed from group up for autonomy-without a steering wheel or pedals", showcasing its free-hand autonomous driving technology.
However, the business growth faced regulatory hurdles due to concerns about road safety. Last month, President-elect Donald Trump's transition administration team reportedly prioritised establishing a new federal framework for self-driving car regulation at the Transportation Department. According to a record by Bloomberg, "an Act of Congress would clear the way for mass adoption of self-driving cars".
This will pave the way for Tesla's focal growing business Robotaxi, backed by its Full Self Driving technology. As stated by Musk at the "We, Robot" event on 10 October, Tesla's Cybercab business could increase its market cap to $5tn (€4.8tn), although he did not give a timeframe.
In June, Cathie Wood's ARK Invest estimated that about 90% of Tesla's enterprise value and earnings will be attributed to the robotaxi business in 2029. ARK Invest funds are known for providing broad exposure to disruptive innovation, with an analyst predicting Tesla’s share price to hit $2,600 (€2,484) by 2029. Another potential benefit Tesla could benefit from the incoming Trump administration is the possible removal of subsidies for electric vehicles in the US.
While this sounds negative for Tesla, which received $739m (€707m) in regulatory credit in the third quarter, the company would remain profitable even without the subsidy, unlike some other small local competitors that have relied on government support. Ironically, this could enhance Tesla's competitiveness. It is worth noting that Tesla's share surge was not solely due to Trump's election victory.
Tesla's share price hit a trough and rebounded after it released strong third-quarter earnings. On the reporting day on 22 October, the company's shares surged 12%, and have extended their uptrend since. Tesla's core automotive revenue grew by 2% year-on-year, returning to growth after declines in the previous two quarters.
Total revenue rose by 8% year-on-year, marking the strongest growth in a year. Elon Musk anticipates that automotive deliveries will increase by 20%-30% in 2025, signalling a rebound in demand for electric vehicles. Tesla delivered 462,890 electric vehicles in the third quarter, a 6.
4% year-on-year increase and a return to growth after two consecutive quarterly declines. This was also the highest third-quarter figure and the third-largest quarterly total in the company's history..
