The end of the year often brings anticipation, not just for holiday cheer but also for stock market gains. Investors eagerly await the "Santa Claus Rally," — when stock prices rise during the final trading week of December and the first two trading days of January. Stocks that have already demonstrated strong performance throughout the year often see continued upward momentum during this period. In the past six months, shares of electric vehicle (EV) giant Tesla TSLA have more than doubled, crushing the broader market. Is Tesla all geared up for a Santa Claus Rally in 2024?
6-Month Price Performance
Image Source: Zacks Investment Research
TSLA’s 2024 Momentum: Riding High on Optimism
Shares of Tesla have surged over 50% since the 2024 U.S. presidential election. Yesterday, TSLA surged to a 52-week high of $404.80 before settling at $389.75, just 6% off its historical peak of $414.50 attained on Nov. 4, 2021. The surge was driven by bullish analyst reports, led by Bank of America (BofA) Securities raising its price target on the stock and maintaining a "Buy" rating.
BofA raised its price target for Tesla from $350 to $400, citing impressive advancements in Tesla’s Full Self-Driving (FSD) technology and the upcoming robotaxi launch. BofA’s Senior Automotive Analyst John Murphy expressed confidence in Tesla’s ability to grow its total addressable market with new vehicles and revolutionary technologies like Optimus, Tesla’s humanoid robot project.
Meanwhile, Wedbush Securities’ Dan Ives maintains Tesla as the market's most undervalued artificial intelligence (AI) play, underscoring the company’s leadership in autonomous driving and AI innovation.
These endorsements come at a time when Tesla is ramping up production of the Cybertruck and reportedly laying the groundwork for the highly anticipated Model Q, a sub-$30,000 EV expected to hit the market in 2025. The launch of this budget-friendly model could expand Tesla’s market reach significantly, ensuring its growth story remains intact.
Tesla's current momentum, surging optimism and groundbreaking developments create an ideal setup for a Santa Claus Rally.
TSLA Trades Above 50 & 200-Day SMA
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Tesla’s Long-Term Drivers
Tesla’s long-term growth drivers make it a compelling story for 2025 and beyond.
Under a Trump administration favoring deregulation, Tesla's long-delayed robotaxi program could gain significant traction, challenging Alphabet’s GOOGL Waymo (which is currently leading the AV race) and further boosting investor confidence.Musk has promised ride-hailing robotaxis in Texas and California, and a few other states by next year, pending regulatory approval. And under Trump’s presidency, bureaucratic hurdles could get much smoother.
TSLA is likely to stay unscathed by Trump’s push to repeal the $7,500 EV tax credit. Its early investment in EV technology gives it a distinct advantage over competitors that still rely on federal incentives. Unlike its rivals, Tesla has largely outgrown the need for such incentives, thanks to its massive scale, high brand loyalty, head start in production and a sprawling Supercharger network.
Tesla’s humanoid robot, Optimus, represents another frontier. Limited production is expected to commence next year, with mass production beginning in 2026. Optimus is expected to leverage Tesla’s AI expertise to disrupt multiple industries.
The company’s gigafactories in Texas, Berlin, and Shanghai provide it with unmatched scale and production efficiency. This global footprint, combined with a robust Supercharger network, reinforces Tesla’s dominance in the EV space. We should not also forget TSLA’s thriving Energy Generation & Storage business. Though it remains a small segment of Tesla’s business, its robust growth and juicy margins should be a significant catalyst in the long term.
High liquidity and low leverage provide Tesla with the financial flexibility to tap growth opportunities. Tesla exited the third quarter of 2024 with cash/cash equivalents/investments of more than $33 billion.
The company is also witnessing positive earnings estimate revisions.
Image Source: Zacks Investment Research
Given the trend of upward earnings estimate revisions aligning with Musk's optimistic outlook for FY25 (vehicle deliveries to surge 20-30% next year) and, of course, the Trump effect, the TSLA stock rally is expected to continue.
Last Word
Buoyed by bullish sentiment, groundbreaking advancements in AI and strides in autonomous driving, the stock looks poised to make the most of the holiday spirit and close the year on a high note, with strong momentum likely carrying into 2025 and beyond. With a robust growth strategy, technological leadership and unmatched market dominance, Tesla remains a compelling investment story for long-term investors.
TSLA sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
