After Trump's election victory, $Tesla (TSLA.US)$The stock price has risen by 31%, with a market cap surge of $250 billion. This astounding increase has raised concerns among some Wall Street individuals, as Tesla's current stock price is already 28% above the average target price set by analysts, reaching the highest level since the tech stock surge after the 2021 pandemic.

This gap reflects the challenges analysts face in assessing how Trump will impact Tesla. Musk has gained a leadership position in government efficiency due to his strong support for Trump, and a potentially friendlier regulatory environment could benefit his businesses. However, even investors who have been bullish on Tesla find it difficult to rationalize the recent surge in Tesla's stock in the short term, especially considering Trump's questioning attitude towards electric vehicles.

Adam Sarhan, founder and CEO of 50 Park Investments, stated that he remains optimistic about Tesla's long-term prospects, but he still points out that

“The market's reaction to Tesla after Trump's victory has been explosive. Although the Trump administration may bring some bullish news, the current surge seems somewhat overheated in the short term.”

Tesla's valuation has always been elusive, with a wide range of target prices from analysts, due to ongoing debates about whether Tesla should be viewed as an auto company, a technology company, or a unique hybrid. Additionally, factors such as Musk's personal brand and potential products like the yet-to-be-listed autonomous taxis also complicate valuation.

The post-election surge in the usa, combined with better-than-expected third-quarter performance, has further elevated Tesla's already lofty valuation. As of the close on Tuesday, Tesla's pe has soared to 104 times its future earnings, far surpassing the median multiples of traditional auto manufacturers and the average of 32 times for the 'big seven tech giants.'

With Trump assuming the presidency, the political and economic complexities he brings are also presenting new challenges for Tesla's valuation. Policies promoting electric vehicles implemented by the Biden administration could be overturned by Trump, which is one of the potential risks analysts are watching. On a macro level, some of Trump's policies may lead to rising inflation, which could pose a potential obstacle. In recent years, high inflation has led consumers to reduce large expenditures, resulting in a decline in auto sales.

On the other hand, deutsche bank analyst Edison Yu stated that some potential policies from Trump could benefit Tesla, such as simplifying federal regulations on self-driving autos and supporting the humanoid robot technology that Tesla is developing. Tesla's leading position in the electric vehicle sector may further expand.

"If the Inflation Reduction Act is repealed or modified, or if extra tariffs are imposed on imported components, Tesla's relative competitive position will further strengthen," Yu pointed out. However, he also admitted that quantifying how the Trump administration will help Tesla "might be more of an art than a science at the moment."

morgan stanley analyst Adam Jonas also expressed a similar view. "It is indeed difficult to quantify the impact Tesla has received due to Musk's relationship with the Trump administration," he wrote in a report to clients this week, "but it is clear that the speed at which Musk's influence is changing, whether real or merely perceived, is accelerating."

Both analysts have a "buy" rating on Tesla stocks and maintained their target prices in their latest reports. The target price given by analyst Yu is $295, while Jonas's target price is $310.

"This round of gains seems difficult to sustain, even if you believe in the long-term growth story of the stock," said David Wagner, portfolio manager at Aptus Capital Advisors and a long-term investor in Tesla. "The political 'memification' of Tesla's stock is illogical." (Note: "meme stocks" refer to those company stocks that have gained fervent retail enthusiasm on social media.)

Editor/ping