This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Electric vehicle stocks fell today, as the market settled in for President Donald Trump's first day on the job. The Dow Jones Industrial Average ripped over 500 points higher, while the S&P 500 and Nasdaq Composite traded modestly higher.
Shares of Tesla (NASDAQ: TSLA) traded nearly 3% lower as of 12:14 p.m. ET today, before finishing the session 0.57% down. Meanwhile, shares of the electric air taxi stocks Archer Aviation and Joby Aviation surged 9.98% and 10.89%, respectively.
President Trump's first executive orders
Trump was sworn into office yesterday and wasted no time getting to work, repealing 78 executive orders from former President Joe Biden and signing many new ones of his own. One of the orders that Trump repealed called for U.S. automakers to significantly lower greenhouse emissions by 2030, a move that encouraged more production of electric vehicles. Most electric vehicle stocks traded down today.
The move has seemingly made investors cautious on the sector, as Trump plans to target other laws impacting EVs. During his inauguration speech, Trump said, "We will end the Green New Deal, and we will revoke the electric vehicle mandate, saving our auto industry and keeping my sacred pledge to our great American auto workers."
Trump signed an executive order calling for an end to the mandate, which refers to rules imposed by the Environmental Protection Agency that would push auto companies to sell electric vehicles or pay emission-related fines. The order seeks to end "state emissions waivers that function to limit sales of gasoline-powered automobiles" and to consider the "elimination of unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs over other technologies ... "
Despite the bad regulatory news, Piper Sandler analyst Alexander Potter reiterated his overweight rating on Tesla and significantly hiked his price target from $315 to $500, calling the stock its best "buy-and-hold idea."
Potter believes Tesla has significant potential with artificial intelligence that is applicable in the real world. While he acknowledges that near-term earnings estimates are falling, he thinks investor sentiment is open to considerable upside from Tesla's future AI opportunities. Inclusive of autonomous driving, Potter values Tesla at $300 per share. The harder-to-model businesses are optimus robots and neural-net-training-as-a-service. Potter arrived at a $500 valuation by valuing the company at 120 times his fiscal year 2026 earnings estimates, which falls in the top half of the company's historical trading range.
Navigating high-valuation waters
Valuing stocks like Tesla is difficult because the high valuations rely on many assumptions that are difficult to have a lot of certainty on. The stock may also continue to face pressure as Trump and/or Congress continues to pass laws targeting the EV sector, although some argue that these could increase barriers to entry in the EV space that would benefit Tesla. For now, I am avoiding Tesla and recommend investors wait for a pullback.
I didn't see any company-specific news on Archer or Joby, but these stocks are volatile so it's not surprising to see a 10% move in one direction or the other on any given day. Both companies are attempting and have made significant progress on commercialising their electric air crafts, which can supposedly cut down traffic-induced trips from hours to minutes.
Many investors believe the Trump administration will green light commercial air taxi flight. Given that both companies are still not profitable and already trade at multibillion-dollar market caps, I'd recommend taking a flyer on these stocks but not yet making them core positions.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
