Tesla ETFs Soar on Trump Win: Should You Buy, Hold or Sell?

Republican candidate Donald Trump claimed victory in the 2024 U.S. presidential election on Nov. 6, 2024. "Trump’s win has proven to be a positive for EV giant Tesla (TSLA Quick QuoteTSLA - Free Report) , as evidenced by the 14.8% jump in the EV maker’s shares on Nov. 6, 2024. The rally in the Tesla stock was propelled by Tesla chief Elon Musk’s strong support for Trump since the latter’s campaign days.

Was Tesla Ailing Before Trump's Win?

Tesla hit headlines recently with an impressive third-quarter earnings report, sending its stock soaring in one of its biggest single-day gains in a decade. In mid-October, the Tesla stock jumped about 23% post earnings release primarily due to margin improvement and an upbeat outlook. Despite this, analysts remained cautious about Tesla’s long-term position among Big Tech, citing concerns that its fundamentals may be overhyped (read: Should Netflix Replace Tesla in "Mag 7"? ETFs in Focus).

We would like to note that Tesla’s delivery numbers fell short of estimates in the past. Tesla has been losing market share to its rivals in both China and the United States, resulting in a notable slowdown in growth. In October itself, we saw Tesla’s unimpressive robotaxi event, which failed to meet expectations, raising concerns among ridesharing investors.

Brokers' Average Price Target Before Trump's Victory

Based on short-term price targets offered by 35 analysts, the average price target for Tesla comes to $217.36. The forecasts range from a low of $24.86 to a high of $315.00. The average price target represents a decline of 13.55% from the last closing price of $251.44 as of Nov. 5, 2024.

Is Trump Bump as Much-Needed Boost to Tesla?

Per Wedbush analyst and Tesla bull Dan Ives, although a Trump presidency would be an overall negative for the EV industry due to a non-EV subsidy environment, Tesla may benefit for a host of reasons, as quoted on Yahoo Finance. Tesla's unrivaled scale and scope in the EV industry could provide Musk and the company with a significant competitive advantage, especially in an environment without EV subsidies (read: ETF Strategies to Consider as Trump Nears Victory).

This, combined with the potential for higher tariffs on Chinese imports (as promised by Trump), would likely keep cheaper Chinese EV manufacturers like BYD and Nio (NIO Quick QuoteNIO - Free Report) from flooding the U.S. market in the coming years. Investors should note that shares of EV-maker Nio slumped 5.3% on Nov. 6 as subsidies for alternative energy and electric vehicles will be threatened in the Trump presidency.

According to a report by CNBC, throughout the campaign, Elon Musk supported Trump, even making financial contributions. Musk's support now seems to align with Trump’s promises to back influential business allies in his administration. Investors are optimistic that Trump’s potential policies could benefit Musk’s ventures, even though Trump is viewed as less enthusiastic about clean energy, as quoted on News 18.

During a campaign rally at Madison Square Garden, Trump announced plans to appoint Musk to lead a proposed government efficiency commission if elected. Musk also put stress on Trump’s commitment to slashing wasteful government spending, stating he could help cut the federal budget by $2 trillion.

Tesla-Heavy ETFs in Focus

While Tesla’s fundamentals do not seem extremely strong right now, Trump’s win could create some indirect opportunities for Tesla. However, we are yet to get any definitive clue on that. Against this backdrop, investors should keep a close eye on Tesla-heavy exchange-traded funds (ETFs).

These include T-Rex 2X Long Tesla Daily Target ETF (TSLT Quick QuoteTSLT - Free Report) (up 29.3% on Nov. 6, 2024), Simplify Volt TSLA Revolution ETF (VCAR Quick QuoteVCAR - Free Report) (up 18.5% on Nov. 6), ARK Innovation ETF (ARKK Quick QuoteARKK - Free Report) (up 8.2% on Nov. 6). Investors should note that the ETF approach always minimizes the company-specific concentration risks.