Tesla (NASDAQ:TSLA) shares are rounding out a phenomenal year, delivering gains as much as 250% off the back of decent performance and a favorable macro environment. For example, much of this year’s rally has been fueled by strong investor sentiment following geopolitical developments, including a tight relationship between CEO Elon Musk and President-elect Trump.
Heading into the first week of 2025, investors are watching the Austin headquartered electric vehicle company closely. Tesla shares have cooled slightly alongside broader market consolidation over the past fortnight, but all signs point to it gearing up for another leg higher as we step into 2025. Let’s jump in and take a closer look.
Tesla’s Strong Fundamentals in 2024 Set the Stage for 2025
To start with, Tesla’s strong fundamental performance throughout 2024 should form the bedrock of further gains in 2025. This past year has seen record-high revenue prints and a continuation of the company’s strong track record of profitable quarters. The company smashed expectations with its latest earnings report in October, which also showed profit margins increasing as production and delivery numbers climbed higher.
This solid operational performance highlights Tesla’s ability to navigate supply chain challenges while maintaining its growth trajectory. Investors should look for the stock to continue this trend heading into its next earnings report, scheduled for the end of January.
Analysts Back Tesla for a Strong 2025
Backing up the bull’s argument for a strong 2025, there’s the fact that several analysts have recently come out bullish on Tesla’s prospects. In a note to clients, the team over at Robert W. Baird reiterated their Buy rating on Tesla shares just before Christmas, echoing Mizuho’s upgrade earlier that same week from Neutral to Outperform.
These upgrades come as the stock consolidates after hitting record highs, suggesting a strong entry point for those considering jumping in. Mizuho’s price target of $515 is particularly noteworthy, as it points to a targeted upside of nearly 25% from where the stock closed on Monday night.
Potential Concerns
Of course, no stock is without its risks, and Tesla is no exception. While many analysts are optimistic, there is a notable variance in opinions. Goldman Sachs, for example, reiterated their Neutral rating this month, as did Cantor Fitzgerald. Guggenheim took it further by assigning a Sell rating, citing concerns about the valuation after such a strong rally this year.
Clearly, there are differing viewpoints. While the bull's argument for further upside is compelling, there is perhaps some merit to the caution around Tesla’s valuation pending the company’s next earnings report. Investors getting involved should have a strong risk management plan in place, as Tesla has a track record of offering more volatility than most $1 trillion companies.
Breaking Above $440 Could Confirm Tesla’s Rally
However, on the whole, there’s a lot more to like about the stock right now than dislike. Tesla’s technical setup, for example, is another compelling reason to be optimistic. The stock’s Relative Strength Index (RSI) currently sits at 55, a bullish signal indicating plenty of room to run before hitting overbought levels. For those unfamiliar, the RSI is a technical indicator that measures the momentum of a stock’s price movements, with readings above 70 typically signaling overbought conditions and readings below 30 indicating oversold territory.
Investors should expect further gains heading into the start of 2025, as this technical setup supports the broader bullish argument. Watch for shares to hold the $420 level they’ve been testing over the past week, with a close below there likely precipitating another round of selling. However, to the upside, a close above $440 would all but confirm the rally is back on, and investors should be getting excited.