Just before Donald Trump's win in November last year, electric vehicle maker Tesla's stock was headed for its third consecutive year of losses in its fifteen years as a public business. However, following Trump's win, the company's stock surge helped the firm rank among the top performers for 2024 in the S&P 500 index.
Elon Musk's 'Trump trade' extends beyond the turnaround in his companies' stock fortunes to his firm's crypto holdings. The ground reality for Tesla remains the same as before Trump's election victory.
There is still complete paralysis inside the EV maker as demand for its automobiles remains shaky, and the future becomes bleak. So, what set off the change in fortunes? Elon Musk's robust campaign support for Donald Trump and his subsequent unofficial participation in the president-elect's administration has triggered a turnaround.
Tesla's turnaround
Investors see that move as a political masterstroke on Musk's part. Shares of Tesla were down over two per cent leading up to the US presidential election. The stock, though, reversed to surge by over 70 per cent after the election results, bringing their 2024 total gains to nearly 70 per cent.
Despite no change to the company's core competencies, the EV maker's market valuation increased by 572 billion dollars in the last two months of 2024, reaching about 1.4 trillion dollars. However, what's caught everyone's attention is Tesla's bitcoin holdings, which boosted its last quarterly profits.
Tesla booked a 600 million dollar boost from Bitcoin after an accounting change. That is according to chief financial officer Vaibhav Taneja during Tesla's earnings call last week.
The accounting technique of mark-to-market resulted in a boost from bitcoin holdings. Trump's crypto embrace spurred bitcoin surge in the December quarter to new record highs repeatedly.
During the previous surge in crypto prices in 2021, tesla disclosed an overall investment of 1.5 billion dollars in bitcoin. Tesla showed digital assets of 1.08 billion dollars on its financial sheet in the latest quarterly report. Following Trump's promise of regulatory backing, the cryptocurrency sector is seeing a resurgence.
After more than doubling in the last year, bitcoin's value peaked on Trump's inauguration day at over 109,000 dollars. Although, the OG token has since fallen in value to below 100,000 dollars.
Despite the boost, the adjusted profits per share for Tesla's December quarter came in at 73 cents, which was lower than the 75 cents expectations on the street. The intention to launch robotaxi operations and the projection of a sales rebound this year gave investors hope. The stock price of the Elon Musk-led business has risen this year again.
Meanwhile, Trump's stance of being anti-electric vehicles is well known. However, investors seem to be placing their bets on Musk's ongoing cosy relationship with the administration to pave the way for Tesla's goal of developing a completely autonomous vehicle.
Wall Street analysts have raised the stock's price estimates significantly. The bets are that regulatory restrictions will be eased significantly, benefitting Tesla's self-driving technology ambitions.
(With the inputs from the agencies)