Today's Tesla shares were experiencing a dip.
Today's Tesla shares were experiencing a dip.
Following an intense bull market after Donald Trump's election last week, Tesla's (TSLA -3.46%) shares have started to cool down today, aligning with the wider market as the S&P 500 is suspected to experience its first decline post-election.
No significant news regarding Tesla was released, but once again, Hertz Global suggested that the appetite for electric vehicles (EVs) might not be as robust as optimists anticipated. The stock's surge over the past four sessions following the election, which saw a near 40% increase, has sparked some skepticism among investors about the company's valuation.
By 2:56 p.m. ET, the stock had dipped by 5%.
Tesla needs to refuel
The only development that could potentially impact the stock price directly was Hertz's announcement of continued weak demand for EVs, with the intention of selling 30,000 electric vehicles by the end of the year. Coinciding with this, J.D. Power predicted that the return of EVs from leases would flood the market over the next two years, reaching 65,600 by the end of 2021 and 215,000 by 2026.
However, the primary reason behind today's stock pullback appeared to be sentiment and valuation, as Tesla's surge lacked a clear business improvement and the broader market decline seemed to signal the end of the post-election rally.
Should you invest in Tesla?
Tesla experienced a remarkable growth surge after the election with Elon Musk openly supporting Trump. However, it remains unclear whether this political affiliation will yield benefits for the EV company.
In fact, Trump had campaigned on a plan to eliminate tax incentives for EVs and other clean energy initiatives. Tesla and other EV producers have grappled with affordability concerns, with Musk himself acknowledging this as a significant challenge. Losing the tax credit, which could amount to $7,500 for some Tesla vehicles, could be detrimental to the company's bottom line.
Investors are hopeful that the Trump administration will relax regulations related to autonomy, enabling Tesla to launch its robotaxi or Cybercab. Yet, safety and public perception will be the ultimate test for these vehicles. Given the potential for accidents and public backlash, a less-than-favorable perception could have significant repercussions for Tesla's reputation.
Despite Musk's close ties with Trump, there is still a considerable amount of uncertainty surrounding the company, and its stock trades at a lofty multiple. If the Trump-related growth strategy falls short, Tesla's stock could experience a steep decline.
Amidst the broader market's suspected decline, investors are scrutinizing Tesla's valuation, potentially leading to opportunities for savvy finance enthusiasts looking to diversify their investing portfolios by purchasing Tesla stocks at potentially lower prices.
Considering Tesla's reliance on incentives and regulatory policies, the company's financial health could be significantly influenced by the Trump administration's regulatory decisions and tax reforms related to electric and clean energy vehicles.