The year is coming to a close (thankfully) and we’re now looking ahead to 2021. Aside from the COVID-19 issue, next year the stock market is going to be very interesting for one major reason: Joe Biden.
Biden is now the president-elect (although President Donald Trump continues to dispute that), and with that fact comes a potentially huge shift in the stock market.
One company stands to profit immensely: Tesla Inc (NASDAQ:TSLA). In fact, I believe TSLA stock could repeat its 2020 success in 2021.
First, let’s take a look at Tesla stock over the past year and why it has become one of the hottest tech stocks around.
Chart courtesy of StockCharts.com
It’s not an overstatement to say TSLA stock blew almost every analyst away with its massive gains in 2020.
Considering how crazy the year has been, with a pandemic, a contentious presidential election, and trade wars, the fact that Tesla stock’s performance remains a top story is a testament to just how impressive the company was in 2020.
Shares of Tesla Inc have nearly quintupled this year. So, if you had invested $10,000 in Tesla about 12 months ago, those shares would be worth about $50,000 right now. Not too shabby.
One of the major reasons that TSLA stock was able to achieve so much success has to do with the company’s quarterly reports.
The Tesla Q3 2020 quarterly report showed massive profits of $331.0 million. This marked the fifth-straight profitable quarter for the electric auto manufacturer. (Source: “Tesla Racks Up Another Profitable Quarter with Boost from Regulatory Credits,” The Verge, October 21, 2020.)
With Tesla cars being more affordable than ever, as well as being more culturally prominent, the company experienced a massive sales boost even amid a pandemic that was throttling so many parts of the economy (not to mention millions of Americans’ savings).
It’s an absolute shock that Tesla Inc was able to generate $8.8 billion in revenue in the third quarter, with $579.0 million in energy storage sales and $581.0 million in services revenue. (Source: Ibid.)
The company, however, wasn’t able to reach profitability purely through sales. Tesla supplemented its profits with $397.0 million worth of regulatory credits in the third quarter, a decrease from the record $428.0 million in credits it sold in the second quarter. (Source: Ibid.)
Tesla Inc was also able to deliver 139,300 vehicles in the third quarter, beating its previous record of 112,000 vehicles delivered in Q4 2019. The company was also able to produce 145,036 vehicles in the third quarter, beating the 82,272 vehicles it produced in the prior quarter.
The disparity in those numbers was largely caused by the factory shutdowns brought on by COVID-19.
Elon Musk, Tesla’s CEO and founder, promised to deliver 500,000 vehicles by 2021, representing a 36% increase over the 2019 numbers. In order to reach that goal, the company will have to exceed past quarters’ numbers and deliver 181,650 cars—not impossible, but unlikely.
When stocks, especially tech stocks, are sold on the potential that the companies have (especially when many skeptics don’t believe the companies will reach that potential), and when the market sees even a few cases of the company reaching that potential, well, you can see the results for yourself.
Tesla stock has shown that it can, in fact, make money. That was a big fear among doubters. Now that this fear has largely been dissuaded, the company is moving on to bigger and better things.
Tesla Inc is hoping to dominate the electric car market. As the largest electric vehicle stock (and renewable energy stock, in a sense), the company maintains enormous market strength going into 2021.
So there’s a lot of momentum behind TSLA stock. The company hitting its goals will continue to spur growth in its share price, but there’s one factor that every investor must consider: the U.S. presidency.
With Biden set to assume take office in January 2021, there will be a huge shift in the economy on a number of levels.
The first is that renewable energy companies will once again rise in prominence. While Trump was not a supporter of climate-change action, Biden won the election largely on a mandate to make positive steps toward renewable energy.
With Tesla Inc among the leading providers of renewable energy, not just in cars, but in homes with its promised batteries, there’s a good bit of potential overlap between Biden’s agenda and Tesla’s.
And with that overlap could come large, generous government contracts and grants, not to mention subsidies that will boost Tesla’s sales numbers (and Tesla’s stock price).
Another important aspect of the Biden presidency is that Wall Street, by and large, is very comfortable with the idea of him in charge. Trump, for all that he did to benefit big business and the stock market, has always been an unknown quantity. You could never accurately predict what he would do next.
Biden is, if nothing else, predictable. He’s a lifelong politician with experience in the White House that can be counted on to reestablish the status quo, at least as far as Wall Street is concerned.
Wall Street gave a combined $74.0 million to the Biden campaign, far outpacing their donations to Trump. (Source: “Wall Street Spent Over $74 million to Back Joe Biden’s Run for President, Topping Trump’s Haul,” CNBC, October 28, 2020.)
And Wall Street rarely spends money unless it can make more of it in the future. In other words, Biden’s stability could lead to higher revenues and stock prices.
Furthermore, federal economic stimulus is now back on the table. While Congress failed to pass anything in the lead-up to the election (much to the chagrin of the American people), stimulus talk will not go away as millions of Americans continue to suffer due to the COVID-19 pandemic.
With Biden in charge, we’ll almost certainly see a financial stimulus package in the near future (though the size is dependent on which party controls the Senate, as well as just how “progressive” Biden is willing to lean).
That stimulus will go a long way toward revving the economy back to life. And a lot of that money could find its way into TSLA stock, not to mention that the company could benefit from a number of different potential stimulus programs, such as government wage subsidies.
Tesla Inc is looking strong right now. With political, cultural, and economic forces lining up behind it, it could have another fantastic year in 2021.
While it’s unlikely that Tesla stock will see another 500% gain, there’s a good chance that it will see massive growth, nonetheless.