Tesla seen as 'a must own stock' in Trump 2.0, rally likely to continue: JPM

Investing.com -- The recent rally in Tesla (NASDAQ:TSLA ) shares in the wake of Donald Trump’s electoral victory is likely to continue this week, according to Paige Hanson, Industrials Sector Specialist at JPMorgan.

Tesla stock jumped 9% on Monday, extending its significant rally from last week driven by Trump’s stunning win over Kamala Harris.

But even before the election outcome, Tesla shares were on a “glide path” toward the $300 mark following what many saw as “a thesis-changing earnings print/forward guide,” Hanson notes.

Specifically, the electric vehicle (EV) giant’s latest earnings print indicated that gross margins are expected to bottom in Q4, setting the stage for a potential cycle of positive estimate revisions after several quarters of negative trends.

Tesla is also the only automotive manufacturer anticipated to have significant production growth next year, according to its 2025 deliveries growth guide. According to Hanson, this was enough for hedge funds and long-only investors to adopt a more neutral or positive stance on Tesla's outlook, marking a notable shift from the previously negative consensus.

Hanson explains that the change in perception among investors is attributed to Tesla's underrepresentation in long-only portfolios for several years and its popularity as a short position among hedge funds.

However, she points out that the technical upward pressure is likely to intensify as long-only investors move from neutral to potentially overweight positions and as hedge funds cover their shorts.

Following the election results, investors now view Tesla as a “must-own stock,” a stark contrast to the past two years when the company faced weak EV demand and issues with gross margin normalization and earning misses.

Thus, the technical upward pressure “is even further exacerbated post-election results,” Hanson said.

Over the weekend, further discussions emerged about Tesla's status as a "Trump Trade," with expectations of continued technical upward pressure from short covering.

Source: Investing.com