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Tesla: Soaring High on Election Waves, Is Now the Right Time to Jump In?

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Written by Timothy Sykes Reviewed by Jack Kellog Fact-checked by Ellis Hobb
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Incredible demand and a surge in production capacity have driven Tesla Inc.’s stocks upward, with increasing international market reach amplifying positive investor sentiment. On Friday, Tesla Inc.’s stocks have been trading up by 9.21 percent.

Influx of Optimism: Market’s Whirlwind Reaction

  • Shares inched up by nearly 15% as traders reveled in the favorable policies anticipated following Donald Trump’s victory.

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Live Update at 14:33:28 EST: On Friday, November 08, 2024 Tesla Inc. stock [NASDAQ: TSLA] is trending up by 9.21%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

  • Tesla’s stock mirrored market elation, reflecting the political shift’s potential boon for the electric vehicle maker.

  • Post-election excitations sprouted discussions of rebates, subsidies, and Tesla’s strategic edge in future EV tariffs.

  • Enthusiasm enveloped the market, fostering conjectures of improved full self-driving prospects under the new administration.

  • Analysts assessed imminent benefits emanating from prospective changes in regulations, reflecting the upbeat mood surrounding Tesla’s trajectory.

Earnings Glance: Under the Magnifying Glass

Tesla’s latest earnings report painted a picture of compelling growth and financial resilience. With a total revenue of over $96.77 billion, the company’s financial prowess was evident. They delivered an impressive gross margin of 18.2%, despite the competitive EV landscape. The spending on research, essential for innovation, clocked in at around $1.04 billion, but that didn’t seem to impede their success.

In terms of profitability, Tesla wasn’t showing signs of slowing down. Their net income from ongoing activities stood at an impressive $2.18 billion, echoing a rebounding once only dreamt of by their skeptics. With a price-to-earnings ratio stretching to 81.57, there was chatter of the stock being overvalued, yet the numbers argued for an anticipated upside.

Then there’s their EBITDA, standing tall at $4.13 billion, underscoring capability in capitalizing on emerging market trends and opportunities. Their balance sheet showed total equity of $70.71 billion, reinforcing investor confidence.

In the arena of cash flow, Tesla boasted a free cash flow of $2.74 billion, portraying adeptness in sustaining robust operations. Meanwhile, debt management appeared meticulously strategized, with a total debt-to-equity ratio kept at a conservative 0.11, further securing their footing.

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The dynamism of financial discussions surrounding Tesla is fueled by these complex and fascinating layers, from market reactions to political peculiarities, making Tesla’s journey both extraordinary and, at times, unpredictable.

Election Windfall: What Lies Beneath

Amidst the rumbles of political change, Tesla stands as a beacon of potential prosperity. The market’s performance following the election encapsulated a vivid narrative where enthusiasm reigned supreme. The prospect of a renewed Trump presidency, like a catalyst, evidently galvanized Tesla’s stock, given prior speculation that subsidies might dwindle.

The jovial market reaction wasn’t simply due to conjectures about subsidies. Discussions were rife with speculation over tariffs on Chinese EVs potentially favoring Tesla, leading some analysts to predict a substantive share price hike. This optimism was fueled by a belief that Tesla’s size and market influence could insulate them from broader industry setbacks.

Target price hikes from analysts like Stifel and Canaccord post-election, accented by an anticipation of production surges in more affordable models and futuristic ventures such as Full Self-Driving and the Cybertruck, were also instrumental in Tesla’s price gyration. Hence, every price rise seemed more than a mere reflex but an acknowledgment of intricate energies at play.

The unwavering focus on their futuristic Full Self-Driving initiatives, alongside cost-reducing strategies, portrays a company poised to capitalize on industry evolutions, even amidst political tremors. Diffusing the aura of buzz is the robust anticipation of regulatory shifts, potentially positioning Tesla favorably within the new terrain of fiscal and trade policies.

Stock or Flux: Unraveling the Price Dynamics

Discussions revolving around the ebullient post-election market reaction center largely on Tesla’s strategic leverage. With the expected shifts in federal vehicle regulations, there lies an optimistic view of Tesla’s stock soaring higher. Yet, amidst fervor, there also lingers prudent analysis.

Barclays’ and Daiwa’s new price targets reflect confident yet cautious optimism. There’s clearly a belief in Tesla’s growth outperformance, driven by promising innovations like Cybertruck and new battery production advancements. Still, the pricing skews depict a market torn between sheer potentiality and grounded valuation.

Exploring their financial ratios offers more clarity. Despite a hefty price-to-cash ratio hinting caution within some investor circles, the underlying strengths remain credible pillars. Management’s efficacy, signaled through astounding capital returns, carves out yet more room for investor confidence.

While supply chain disruptions remain a latent chatter, the unbroached exuberance signifies intrigue in Tesla’s enduring role in shaping the global EV landscape. Indeed amidst the finish lines brews a realm of ambiguity, curiosity, and unprecedented excitement.

Whether riding on the cusp of a growth cycle or amidst the orchestrations of speculative fervor, Tesla continues to undeniably captivate the financial theatre with each pivotal move, remaining a quintessential enigma of the market.

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The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”