Here’s a forecast for Tesla’s share price as Trump’s policies take hold

At the time of writing, the Tesla (NASDAQ:TSLA) stock price is up 42% in one month. Of course, the thing that played a role in this re-election was Republican Donald Trump – his biggest donor was Tesla boss Elon Musk.

It’s not just Musk’s Tesla stock that has grown. Reports suggest his SpaceX business is looking to raise more capital, valuing the company at around $250bn – up from $180bn in the summer. Meanwhile xAI has just raised $5bn, valuing the artificial intelligence company at $45bn – double its value just a few months ago.

But what about Tesla? What are the predictions about the firm and will it live up to its share price?

What the commentators say

The average price of Tesla shares is $207. That’s 33% below the current share price, meaning the stock is overvalued. In fact, I don’t think there are any other major stocks that are trading so far above the estimated price target.

These are the goals of large institutions such as HSBC and other brokerages. But it is true that some analysts are always more active in the company. Cathie Wood’s Ark Invest, for example, suggested that Tesla stock could reach $3,100 by 2029.

Tesla’s earnings forecast

Tesla certainly divides opinion among analysts, and earnings forecasts and estimates present a mixed picture.

Analysts project earnings per share (EPS) to decline in 2024 before rebounding with strong growth in the following years. The average EPS estimate for 2024 is $2.49, representing a 20.33% year-over-year decline.

However, EPS is expected to grow by 31.27% by 2025 to $3.26, with further growth predicted through 2030.

Tesla’s Forward Price-to-Earning (PE) ratios remain high compared to traditional automakers, reflecting investors’ expectations for future growth. The forward IP/E of 2024 is 125.19 times, gradually decreasing to 43.26 times in 2029.

However, it is clear that these numbers are ridiculously high for an electric vehicle (EV) manufacturer. Instead, investors are banking on Tesla winning in autonomous driving and robotics. The problem is, Tesla seems to be falling behind its robotaxi peers.

Can we justify moderation?

I didn’t quite cover why Tesla stock went up when Trump won. So, why is Tesla trading so high? Well, it’s because Musk has been tipped to have an active role in the new administration and this may allow him to push for autonomous driving laws across the country that will benefit his robotaxi operations.

However, we saw a drop in Tesla’s stock price on Thursday November 14 after Trump said he would remove EV subsidies. There are obviously pros and cons for Tesla under the Trump administration.

For me, the bottom line is that Tesla is currently not justifying its valuation. While the company’s ability to innovate is impressive, bringing new technology to market at scale is fraught with challenges. The high expectations built into Tesla’s stock price leave little room for setbacks or slower-than-expected growth.