Tesla’s (NASDAQ:TSLA) business priorities for 2025 revolve around several key areas: achieving renewed volume growth (driven by the launch of a new, affordable model), pushing ahead with autonomous vehicles and AI, and increasing contributions from “other” segments, including regulatory credits and the Energy division.
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But do these key areas truly impact Tesla stock’s performance? Perhaps some do, but according to Barclays analyst Dan Levy, fundamentals “remain secondary vs. the broader theme of narrative command for Tesla,” which since November’s Presidential election, has “gone into hyperdrive.”
“The stock has become untethered from fundamentals, arguably similar to what we saw with Tesla stock in late 2021 when the market was awash in EV euphoria,” Levy went on to say. “Yet it’s important to note this move has very little to do with EVs, as the Election catalyst is objectively a negative for EVs.”
Nevertheless, the stock is up by 66% since Trump’s win with Levy noting that many investors he has spoken to have been “stunned by the magnitude of the rally” and are growing more uncertain about how to approach the stock, given its apparent huge disconnect from underlying fundamentals. To wit, Tesla’s valuation multiple has surged to a lofty 123x ’25 price-to-earnings ratio, up from 80x just before the election.
Investors have no doubt been enthusiastic about the AV/AI opportunity ahead given the substantial TAM (total addressable market) with Tesla once again about to take on the role of disruptor – despite the distant nature of the opportunity and the challenges of monetizing it.
But that in no way tells the full story. Much more than that, the stock has been benefitting from what Levy terms the “Elon premium,” which the analyst thinks is at an all-time high, particularly given how influential Musk is set to become on the back of Trump’s win. With Tesla firmly establishing itself as the “OG meme stonk,” its closest comparison is perhaps Bitcoin, with Musk’s star power taking main stage in this dynamic.
Betting on Tesla on account of Musk’s “first buddy” status, though, is quite a risky strategy and given the size of the egos involved, and the history – Musk remarked in 2022 that it was time for Trump to “sail into the sunset” – it’s certainly not out of the realm of possibility to think a falling out is in the cards at some point during Trump’s 4-year reign.
Eventually, says Levy, fundamentals will “return to being important to Tesla investors. Yet for now it’s unclear to us what the negative catalyst is, with the stock to potentially remain elevated for now.”
To this end, Levy assigns an Equal Weight (i.e. Neutral) rating on Tesla shares, and although his price target goes from $270 to $325, the new figure still sits ~21% below the current share price. (To watch Levy’s track record, click here)
11 other analysts join Levy on the sidelines and with an additional 13 Buys and 9 Sells, the consensus view is that Tesla stock is a Hold. The $329.63 average price target is similar to Levy’s objective, implying a ~20% downside. (See Tesla stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
