With These Two Big Drivers, Tesla's Stock Continues to Climb

Tesla Inc. shares rose by 2% early Tuesday, driven by optimism over CEO Elon Musk’s potential alignment with the new administration and further supported by a bullish note from Piper Sandler. Investors are anticipating that Musk’s close ties to the Trump administration could benefit Tesla, particularly in areas like self-driving technology and broader initiatives.

‍

On Tuesday, President Trump kicked off his second term with a series of executive orders, including one targeting the so-called "EV mandate," a regulation from the previous administration that required automakers to increase sales of electric and hybrid vehicles over time. The rule, introduced in March and later adjusted due to lobbying efforts, was not a direct mandate for buyers but aimed to accelerate the transition to cleaner vehicles.

‍

In announcing the order, Trump framed it as a win for American auto workers and consumers. “With my actions today, we will end the Green New Deal and revoke the electric-vehicle mandate, saving our auto industry and keeping my sacred pledge to our great American auto workers. In other words, you will be able to buy the car of your choice,” Trump said.

‍

While the rule is still in place for now, changes could take time to implement, offering a window of opportunity for companies like Tesla. Investors are speculating that Musk could benefit from more lenient regulations under Trump’s leadership, which might extend beyond Tesla’s core business to include Musk’s other ventures.

‍

Tesla’s stock has risen approximately 70% since the presidential election, underscoring growing investor confidence. Piper Sandler analysts have maintained their bullish stance on Tesla, reiterating that the company is their top buy-and-hold recommendation. Led by Alexander Potter, the analysts raised their price target for Tesla from $315 to $500, reflecting a 17% potential upside from current levels. However, they acknowledged that the first half of the year could be volatile.

‍

“We think investors are starting to appreciate Tesla’s potential in ‘real-world’ AI, and as a result, portfolio managers are more willing to entertain upside scenarios,” Piper Sandler wrote in their note. Despite this optimism, they cautioned that near-term uncertainties, including falling estimates for the current year, could overshadow Tesla’s long-term narrative.

‍

The analysts emphasized two critical metrics for Tesla’s financial performance: vehicle deliveries and automotive gross margin. While Tesla is projected to deliver 1.96 million units in 2025, up from 1.79 million in 2024, the timing of new product launches remains uncertain. Piper Sandler also anticipates over 100 million units from unspecified vehicle models and around 70,000 Cybertruck deliveries.

‍

“Bottom line: we can’t defend this forecast, and there could be downside—but if so, evidence probably won’t emerge during the Q4 call,” the analysts noted.

‍

On the margin side, Piper Sandler highlighted positives such as lower battery-material and logistics costs but acknowledged potential negatives, including price discounts used to clear inventory and deferred revenue unlocks, where revenue is recorded upon product delivery. “So long as Tesla doesn’t waffle on launching new products, we expect solid post-Q performance,” the analysts added.

‍

Looking further ahead, Piper Sandler predicts Tesla will peak at about 4.6 million units annually by 2032, down from earlier projections of over 8 million units. Once Tesla completes its current product roadmap, the analysts expect management to shift focus from launching new vehicles to popularizing its Full Self-Driving (FSD) software. Reflecting this shift, Piper Sandler has incorporated potential contributions from FSD licensing into their models.

‍

Tesla’s valuation, according to Piper Sandler, will increasingly depend on emerging opportunities such as the Optimus humanoid robot and neural-net-training-as-a-service. These revenue streams, while promising, are challenging to quantify in a traditional discounted cash flow model. “By one year from now, investors should have greater clarity on new product cadence, allowing them to focus on other, more exciting topics, such as rising FSD efficacy and Tesla’s AI ambitions,” the analysts concluded.

‍

Over the past 12 months, Tesla’s stock has gained 101%, significantly outperforming the S&P 500, which has risen by 24%. This continued momentum reflects investor confidence in Tesla’s ability to innovate and capitalize on both regulatory changes and emerging technologies.

‍