Why Tesla stock keeps going up

Tesla stock costs more than $1 trillion now. Is that too expensive?

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Tesla (NASDAQ: TSLA) stock continued putting pedal to metal as stock markets reopened for business Monday. Through 12:20 p.m. ET, the electric car leader gained 7.3%, bringing total gains since Donald Trump won reelection (with Elon Musk's support) to a staggering 37%.

Oh, and Tesla is a trillion-dollar company again -- $1.1 trillion, to be precise.

What's driving Tesla stock higher

Today's gains owe in part to growing enthusiasm for Tesla stock on Wall Street. Specifically, investors seem to be reacting to a new price target hike from investment bank Wedbush. According to reports, Wedbush analyst Daniel Ives just raised his price target on Tesla stock to $400 -- a 33% increase.

"The Trump White House win will be a gamechanger for the autonomous and AI story for Tesla and Musk over the coming years," predicts Ives. More than just a reward for financial support that helped him win reelection, the analyst anticipates that a new Trump administration will clear out the "federal regulatory spiderweb" that has slow-rolled developments in artificial intelligence and self-driving cars alike.

And while it's hard to quantify what that might mean for Tesla (Ives says $1 trillion, but really, that's just a guess), Musk has positioned Tesla to capitalise on these technologies. If a Trump White House works to get these developments fast-tracked, Tesla would be a logical company to benefit from that.

Is Tesla stock a buy?

Enticing investors with big, round numbers like $1 trillion, without providing math to support the number, is a great way to attract momentum traders to Tesla stock. More cautious investors, however, shouldn't ignore the math.

After its run-up these past few days, Tesla stock now costs a distressingly high 88 times trailing earnings, and 322 times free cash flow. Tesla's going to have to grow awfully fast to justify those multiples. Worse, it may have only four years in which to grow before regulations change again. Do you want to bet on all that growth happening in such a short time? Because I don't.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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