Updated at 10:52 AM EST
Tesla shares nudged higher in early Tuesday trading after a top Wall Steet analyst lifted his rating and price target heading into the final weeks of a rollercoaster year for the world's leading EV maker.
Tesla ( TSLA ) shares, which lagged the broader market for much of the first half as delivery figures flagged and profit margins narrowed, have been one of the strongest post-election performers in the S&P 500.
Since Election Day the stock has risen around 60% and added nearly $450 billion in market value, as investors expect the close relationship between CEO Elon Musk and President-elect Donald Trump to deliver big gains to Musk's suite of private and public companies.
Tesla itself, however, could faces a series of crosswinds over the coming months, including a removal of key tax incentives for the purchase of new electric vehicles and the potential for new tariff barriers tied to the protectionist trade policies Trump has proposed.
Morgan Stanley analyst Adam Jonas, one of Wall Street's most-influential Tesla analysts and a longtime proponent of the stock's broader value, still sees Tesla as a top pick in the bank's stable of recommendations.
Autonomous-driving leadership key for Tesla
Jonas, who in a note published Tuesday lifted his Tesla price target by $90 to $400 a share, said the election brought "near-term headwinds to US EV sales." But he adds that the group can add and maintain value by ensuring that it "does not cede autonomous leadership to geopolitical rivals."
"The US election result has extended the 'ICE is Nice' trade for a bit longer but keep on the lookout for hidden value in the EV ecosystem into" the second half, Jonas and his team wrote. "We recommend investors stay nimble and selective given the volatility of policy outcomes."
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Jonas has in fact argued that Tesla's market value could reach around $1.6 trillion if his bull case for the stock comes to fruition and Musk's involvement with the new administration enables a repricing of its AI ambitions.
Musk himself touted the profit potential of AI technologies, particularly with respect to the group's ambition to offer self-driving software to its near 7 million global EV fleet. He has said that capital spending would likely rise to around $10 billion this year as a result.
“Elon Musk's entry into the political sphere has expanded investor thinking around Tesla’s fundamental outlook," Jonas and his team wrote.
“As we look ahead to [fiscal 2025] (and over the next 4 years), we expect to see Tesla’s [total addressable market] aperture expand to far wider domains, many of which are not included in buy-side or sell-side financial models for the company,”
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Tesla's autonomous-driving push, which has included new versions of his full self-driving software over the past weeks, is also expected to get a boost from looser regulations that could accelerate its wider adoption from its U.S. customer base.
"Members of President-elect Trump's transition team have said that implementing a federal framework for fully autonomous vehicles will be one of the Transportation Department's top priorities," said CFRA analyst Garrett Nelson, who lifted his Tesla price target by $75 to $450 in a note published late Monday.
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"In our view, Tesla's recent FSD version 13 demonstrates many new features, such as the ability to park autonomously at the end of a planned route and start FSD from a parked position," he added.
"We think that such ongoing improvements will help expedite the timing of Tesla ultimately being granted a federal autonomous driving permit under the new administration."
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Tesla shares were marked 3.5% higher in early Tuesday trading to change hands at $403.16 each, a move would extend the stock's 2024 gain to around 63% with a market value of $1.26 trillion.
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