Tesla Volatility and the Importance of Jan. 20: Is it a Buy?

Tesla (NASDAQ: TSLA) has long been one of the most volatile megacap tech stocks, offering tremendous gains for long-term believers while posing significant risks for those trying to time the market. With Jan. 20, 2025, marking President-elect Donald Trump’s inauguration, Tesla investors are eyeing this date for potential movement in the stock price due to CEO Elon Musk’s perceived ties to the incoming administration.

Below is a deeper analysis of Tesla’s current situation, its near-term risks and opportunities, and whether now is the right time to invest.

Tesla’s 2024 Performance: A Roller Coaster Year

Tesla stock had a turbulent 2024. Between Jan. 1 and Nov. 4, shares were down 2.3% for the year, significantly underperforming the S&P 500. At its lowest point, Tesla stock dropped nearly 43%.

However, the narrative changed dramatically following Donald Trump’s election victory on Nov. 5. In the final two months of the year, Tesla rallied over 66%, regaining its trillion-dollar valuation. Investors were optimistic about Musk’s vocal support for Trump, believing it could translate into favorable regulatory policies for Tesla’s autonomous driving and artificial intelligence (AI) initiatives.

Despite this rally, Tesla saw a sharp 14.3% decline after Dec. 24, driven by year-end profit-taking and underwhelming Q4 production and delivery results.

Why Jan. 20 Could Be a Pivotal Date

The Jan. 20 inauguration is being viewed as a potential catalyst for Tesla stock for several reasons:

1. Pro-Musk Sentiment: Musk’s public alignment with Trump could fuel optimism around regulatory support for Tesla’s projects, including autonomous driving and AI.
2. Market Narrative: The market often prices in political narratives, even if they have little immediate impact on a company’s fundamentals.

However, it’s important to remember that Tesla’s fundamentals won’t suddenly shift on Jan. 20. Investors need to differentiate between short-term momentum and the company’s long-term prospects.

Tesla’s Challenges and Opportunities

Short-Term Challenges

1. Q4 Miss: Tesla’s recent delivery and production numbers fell short of Wall Street expectations, casting doubt on near-term growth.
2. Year-End Profit-Taking: After significant gains, many investors have locked in profits, contributing to the recent sell-off.

Long-Term Opportunities

1. AI and Autonomous Driving: Tesla remains a leader in autonomous driving technology, with its AI and robotics projects offering massive future potential.
2. Scaling Production: Tesla’s ability to scale its EV production, especially with the launch of new models and factories, remains a core growth driver.
3. Regulatory Tailwinds: A Trump administration could ease regulatory hurdles, potentially accelerating Tesla’s innovations in self-driving cars.

Is Tesla Stock a Buy Before Jan. 20?

For Long-Term Investors

If you believe in Tesla’s vision for AI, autonomous driving, and EV dominance, the exact timing of your investment matters less. Tesla has proven its ability to innovate and disrupt, making it a compelling long-term bet despite short-term volatility.

For Short-Term Traders

Momentum-driven rallies around Jan. 20 are possible, but they carry significant risks. Tesla’s recent declines highlight the dangers of trading on narratives rather than fundamentals. If your risk tolerance is low, it may be better to wait for more clarity around Tesla’s performance and regulatory landscape.