Tesla shares turned negative in premarket trading, reversing initial gains.
Tesla Inc. fans have been reinvigorated by Donald Trump’s presidential triumph. The stock’s climb has been seemingly unstoppable as investors pile into the shares, confident that a second Trump term will bring windfalls to the Elon Musk-led electric vehicle maker.
All together, the stock has advanced over 39%, adding more than $300 billion in market capitalization since the Nov. 5 election. Shares closed up about 9% at $350 on Monday.
Market professionals point to the fact that Tesla is a classic “momentum” stock, where both gains and losses tend to snowball quickly when investor sentiment takes a sharp turn in either direction.
A Trump White House will be a “game-changer” for Tesla’s self-driving and artificial intelligence efforts, according to Wedbush analyst Daniel Ives, who raised his price target on Tesla to $400 from $300 earlier. He estimates that the “AI and autonomous opportunity is worth $1 trillion alone for Tesla.” The analyst maintained his buy-equivalent rating on the stock.
Wall Street price targets haven’t kept pace with the stock’s run and now imply about a 32% drop over the next 12 months. Some analysts have expressed skepticism over the magnitude of the rally, saying that it’s likely overestimating any gains that Tesla can reap from the Republican’s electoral victory.
Tesla’s 14-day relative strength index, a gauge of bullish and bearish price momentum, closed at 81 on Monday. A level above 70 is often considered a technical signal that a drop may soon be in store.
