Tesla Stock Hits All-Time High: ETFs to Ride the Momentum

Tesla TSLA shares closed at a record-breaking $424.77 on Wednesday, continuing a rocket rally since President-elect Donald Trump's victory. The stock touched an intraday high of $424.88, surpassing its previous record close of $409.97, hit on Nov. 4, 2021.

Since Trump's election win last month, Tesla's stock has skyrocketed by 69%. CEO Elon Musk's perceived influence on the incoming administration has bolstered investor confidence in Tesla's future prospects.Tesla shares have reflected the top performer of the Mag 7 group over the last three months, gaining about 80% during the period.

Strong Sales in China Drive Momentum

Tesla's growth in China has been a significant driver of its recent success. The company announced it sold 21,900 electric vehicles on the mainland during the first week of December—the highest weekly sales recorded in Q4. This follows a record-breaking November, with 73,000 units sold. Incentives such as 0% interest loans for five years and a 10,000-yuan ($1,400) discount for new Model Y buyers have fueled demand.

Regulatory Tailwinds Boost Autonomy Hopes

Analysts are optimistic on the potential benefits of federal deregulation for Tesla, which derives 33% of its valuation from the AV business, as quoted on electric-vehicles.com. Deregulation could streamline the approval process for Tesla’s full self-driving (FSD) software and Robotaxi services. While state and local governments retain authority, federal support could accelerate these initiatives (read: Tesla Stock Pops 5% on AV Deregulation Buzz: ETFs in Focus).

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.

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 from flooding the U.S. market in the coming years. Investors should note that shares of EV-maker Nio’s stock gained only about 2% in the past one month as subsidies for alternative energy and electric vehicles will be threatened in the Trump presidency.

Musk’s Political Presence

Morgan Stanley’s Jonas noted that Musk’s emerging political presence might extend Tesla’s influence beyond the automotive industry. Trump named Elon Musk to lead panel on government efficiency.

Analysts Raise Price Targets

Tesla’s strong performance has prompted multiple analysts to increase their price targets. Analysts like Edison Yu and Deutsche Bank, John Murphy of BofA, and Adam Jonas of Morgan Stanley have improved their price targets for the stock over the past few days, as quoted on Yahoo Finance.

Factors that led to the rise in price targets include increased confidence in Tesla's autonomy efforts, advancements in AI, robotics, and renewable energy, the anticipated debut of Tesla’s affordable 'Model Q' EV next year, and the potential for federal regulatory support.

Any Threat Ahead for Tesla?

While Trump’s win could create some indirect opportunities for Tesla, the company’s fundamentals also show some weaknesses. Google's GOOGL Waymo continues to surge ahead of Tesla. Tesla’s lofty ambitions to launch autonomous services in 2025 will likely face some challenges, as the company faces strong competition from Waymo in the robotaxi market.

According to a recent research report, Tesla’s autopilot requires human intervention every 13 miles, as quoted on Seeking Alpha. This is 100 times more frequent than Waymo’s, making it challenging for Tesla to close the technological gap in the near term."

Tesla-Heavy ETFs in Focus

Against this backdrop, investors can consider Tesla-heavy exchange-traded funds (ETFs) to diversify their exposure while remaining invested in the carmaker. These ETFs include Nightview Fund NITE, Consumer Discretionary Select Sector SPDR Fund XLY and ARK Autonomous Technology & Robotics ETF ARKQ.

Another way to invest in Tesla with a reduced level of risk is through a Tesla option income strategy. YieldMax TSLA Option Income Strategy ETF TSLY seeks current income and exposure to the share price of the common stock of Tesla subject to a limit on potential investment gains. The TSLY ETF yields 65.49% annually and its expense ratio is 0.99%.

Kurv Yield Premium Strategy Tesla ETF TSLP aims to provide current income while offering exposure to Tesla stock, subject to a cap on potential investment gains. The TSLY ETF yields 19.39% and charges 99 bps in fees.

There is Simplify Volt TSLA Revolution ETF VCAR, which aims to provide capital appreciation by investing primarily in Tesla stock. The fund captures the potential of Tesla’s stock price movements while implementing an advanced options overlay to manage downside risks.

And if you are too bullish on Tesla, you can play ETFs like Direxion Daily TSLA Bull 2X Shares TSLL , T-REX 2X Long Tesla Daily Target ETF TSLT, Tradr 1.5X Long TSLA Weekly ETF TSLW and GraniteShares 1.25x Long TSLA Daily ETF TSL (see all Single Stock ETFs here).

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