Just like trading cryptocurrencies! Tesla's surge: "making big promises" and "trading options"
Barclays believes that the rise of Tesla and Bitcoin is driven by a similar logic: both are fueled by investors "madly buying into the story," which has become disconnected from the fundamentals. In addition, the frenzy of buying call options after the election has also contributed to the rise in Tesla's stock price
Elon Musk "bets" on Trump to welcome the "harvest season," and Tesla's stock price is soaring.
Since the U.S. election day on November 5, Tesla's stock price has risen by a cumulative 75%, more than doubling in the past six months.
How to understand Tesla's recent surge?
On December 19, Barclays analysts Michael Tyndall, Pushkar Tendolkar, and others stated in a report that Tesla's stock price surge is almost akin to the explosive rise of Bitcoin.
Barclays believes that after the election, Tesla's stock price nearly doubled, with the price-to-earnings ratio increasing from 80 times before the election to 145 times, while its fundamentals have not significantly improved—this phenomenon reflects that Tesla's narrative has been exaggerated, especially in the fields of autonomous driving and artificial intelligence.
The election did not boost fundamentals; frenzied sentiment drove stock price soaring
Barclays stated in the report that the rise of Tesla and Bitcoin is driven by a similar logic: both are fueled by investors "madly buying into the story."
The report suggests that for investors, Tesla's appeal lies not only in the automotive sector but also in the company's potential in robotics, artificial intelligence, and other fields. However, if Tesla is viewed as an AI company, it still has a distance to cover compared to Nvidia's over 300% increase to date.
The report notes that while the election drove Tesla's recent surge, the Trump administration's policies may be "mixed blessings" for Tesla, and the fundamentals are not as "positive" as the market imagines.
First, Trump's advocacy for cutting tax incentives for new energy vehicles may harm Tesla's competitors more, but it is also expected that Tesla's market share, which accounts for about two-thirds of U.S. sales, will be dragged down.
Second, Tesla is expected to benefit from relaxed regulations on autonomous driving, but if the relaxation occurs before Tesla achieves comprehensive technological advancements, it may instead benefit Tesla's main competitor in autonomous driving, Waymo.
The report also states that Musk's "successful alignment" brings a premium to Tesla's stock price while also introducing corresponding risks, as Tesla is the only publicly listed company in Musk's business empire.
Barclays also believes that Tesla's stock price increase is driven by technical factors, particularly unusual activity in the options market, which has led to a phenomenon known as "gamma squeeze."
"Gamma squeeze" refers to the situation where increased buying of call options drives up the stock price, leading more options to become in-the-money, prompting traders to continue buying stocks to hedge their risk exposure, further pushing up the stock price The report indicates that since the election, the nominal trading volume of Tesla call options has averaged $100 billion. On election day, the nominal trading volume of Tesla call options reached $245 billion, while the trading volume of other options in the market only reached $310 billion.
In addition, the call-put ratio of Tesla options after the election was 1.7 times, significantly higher than the average level of 1.4 times in 2024, reflecting investors' desire to leverage and chase the rise.
The bank stated that during the period when the stock rose by 4-5% (i.e., a market value fluctuation of $50-60 billion), the excessive activity in options played a certain role.
HSBC analysts also mentioned in their latest report that compared to the "seven sisters" of technology stocks, Tesla's fundamentals cannot support the current stock price trend.
For the upcoming fourth fiscal quarter, HSBC expects Tesla will struggle to maintain the strong performance of the third quarter, with gross margins potentially declining by 140 basis points quarter-on-quarter.
Moreover, considering the general decline in Tesla's market share in major markets over the past year, the divergence in sales expectations among various institutions, the uncertainty surrounding new models, and the limited established production capacity, HSBC believes that Musk's expectation of achieving a 20%-30% sales growth for Tesla by 2025 is "unrealistic."
