According to a report from Bloomberg on Monday (December 30), a well-known investor in Tesla stated that CEO Elon Musk seems to have shifted his focus away from daily Operations and is more inclined to influence the incoming Trump administration.
"Musk has indeed set the strategic direction for the company and has control over the executive team responsible for various projects, but he is not managing the company in the traditional sense, like NVIDIA CEO Jensen Huang does," said Ross Gerber, president of Gerber Kawasaki Wealth and Investment Management, in an interview with Yahoo Finance's "Catalysts" segment.
Gerber further added, "I think Tesla's Shareholders are very aware that their CEO is effectively serving Trump now."
The Close Relationship between Musk and Trump
In recent months, the "brotherly bond" between Musk and President-elect Trump has been glaringly evident. The two have publicly praised each other, and Musk has donated at least 0.132 billion dollars to Trump and other Republicans' campaigns.
In return, Trump appointed Musk to co-lead the newly established Department of Government Efficiency (DOGE) alongside another staunch supporter, Vivek Ramaswamy. Musk has reportedly made frequent appearances at Trump's Mar-a-Lago estate, meeting with world leaders and advising Trump. He even intervened in the federal debt ceiling debate this month, nearly causing a government shutdown.
Although Trump has traditionally opposed clean Energy policies and may cancel the $7,500 tax credit for each electric vehicle established by the Biden administration, Tesla could potentially be in a favorable position under Trump’s policies due to Musk's close relationship with him.
Tesla's stock price has surged, but risks have become evident.
Since Trump's victory in the presidential election, Tesla's stock price has soared 74%, far exceeding the nearly 5% increase of the S&P 500 Index. However, this surge in stock price comes with risks.
Gerber believes that 2025 will be a key year for Tesla. As Musk dedicates more energy to the Trump administration, Tesla's team will need to take on greater responsibilities. Currently, only three executives are listed on Tesla's investor relations page: Musk, the new Senior Vice President of Autos Tom Zhu, and the new Chief Financial Officer Vaibhav Taneja.
If the team's execution is insufficient to support Tesla's high valuation, the stocks could be penalized. "Whether Tesla's new team can prove itself remains to be seen," Gerber said, "I know the previous old team very well, they were outstanding, but they have all been fired in the past year. The current team needs to deliver satisfactory results in 2025 because there are many tasks awaiting completion in the next 12 to 18 months."
Investor Divergence: Valuation Risks vs. Long-Term Potential
As a long-term Tesla shareholder, Gerber was once a firm supporter of the company. However, due to concerns about valuation and Musk's risks, he has gradually reduced his shareholding in Tesla since 2023, and Tesla's proportion in his company's investment portfolio has now fallen to less than 2%. Gerber estimates Tesla's fair value at about $200 per share, which is 52% lower than the current stock price. According to Yahoo Finance data, the average target price from sellers for Tesla is $283.
Nevertheless, there are still many supporters of Musk and Tesla on Wall Street. At the Yahoo Finance Investor Conference, Nuveen Chief Investment Officer Saira Malik pointed out that the ongoing global transition to Wind Power and Musk’s relationship with Trump are two important catalysts for Tesla. "In the long run, Tesla has tremendous growth potential," Malik stated.
Additionally, Wedbush Analyst Dan Ives has listed Tesla as his top stock pick for 2025. He stated in the Yahoo Finance "Opening Bid" podcast, "By 2026, you will see the emergence of autonomous ride-hailing taxis. Tesla is not just a car company; it is increasingly not seen as a traditional electric vehicle manufacturer. This is a game about the future of autonomy, and the autonomous driving industry alone is worth a trillion dollars."
Challenges and Prospects
Despite the rapid rise in stock prices raising concerns over overvaluation, especially among AI-related companies, the market currently remains confident in Tesla. According to Bloomberg's tracking of 19 strategists, none expect the S&P 500 Index to decline next year; the most conservative prediction suggests the market will stabilize, while the most optimistic target is as high as 7100 points, indicating a further increase of 19% from current levels.
Deutsche Bank's Chief American Stock and Global Strategy Analyst Binky Chadha expects the S&P 500 Index to reach 7,000 points by 2025, reflecting confidence in sustained economic growth and low unemployment rates. He stated, "Forecasting the market requires thinking 'year by year'. In a typical year, the stock market may decline by 3% to 5% every two to three months. Does that mean you shouldn't buy Stocks? No, you should buy, because they will rise again."
