Tesla (NASDAQ: TSLA) is one of the most volatile megacap tech stocks. While owning Tesla has been (mostly) a great decision over the long term, timing has often been critical.
The company has a lot of exciting projects involving its electric vehicles and artificial intelligence (AI), but I'm remaining cautious as an investor for the time being. Below, I'm going to break down why Jan. 20 could be a particularly important date for Tesla investors and whether the stock is a buy before then.
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Let's break down Tesla's stock performance in 2024.
Between Jan. 1 and Nov. 4, 2024, Tesla stock was down 2.3% and trailing the S&P 500 by a wide margin. However, shares were actually down as much as 42.8% at one point during this period.
Following Donald Trump's victory in the U.S. presidential election on Nov. 5, Tesla stock found new life. Between Nov. 4 and Dec. 31, shares gained 66.3%, and the company reclaimed its position in the trillion-dollar club.
Tesla CEO Elon Musk emerged as a major Trump supporter during the final months on the campaign trail. Investors began to see the Trump-Musk alliance as a bullish indicator for Tesla.
While that may sound great for Musk and the company, look above at the stock's performance near the very end of the year, and you'll see Tesla began to sell off. Since Christmas Eve, shares are down 14.3% as of this writing.
Selling stocks at the end of the year is pretty common, especially for companies that have generated record gains over short periods. Moreover, Tesla recently published delivery and production figures for its electric vehicle operation for the fourth quarter, and they show that it missed Wall Street's expectations.
Although Tesla stock appears to be stuck in a downward trend, I wouldn't be surprised to see shares rebound as Jan. 20 inches closer. Let's dig into why.
On Jan. 20, President-elect Donald Trump will be sworn into office. Given Musk's ties to the soon-to-be president, I would not be shocked in the slightest if Tesla stock starts to see an uptick.
Here's the reality: While Musk's relationship with Trump may bode well for Tesla -- especially as it relates to a friendlier regulatory environment for the company's autonomous driving ambitions -- any gains leading up to or immediately following the inauguration are driven by a narrative, not Tesla's fundamentals.
Since the election, Tesla has fared much like a meme stock. Nothing about the company changed on Nov. 5. Nothing is going to change for it on Jan. 20, either. Investors don't know how the company's autonomous driving efforts will shake out or what regulatory changes the incoming administration will make in that area.
So if you're going to invest in Tesla stock right now, you should believe in the company's long-term vision for AI, self-driving cars, and robotics. If that's the case, it matters far less when you scoop up shares.
Otherwise, investing in momentum stocks like Tesla is usually risky. If you have a low tolerance for risk, you may want to steer clear.
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*Stock Advisor returns as of January 13, 2025
Adam Spatacco has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.