Should You Buy Tesla ETFs on $1 Trillion Comeback?

Electric vehicle maker Tesla TSLA reclaimed its $1 trillion market cap value. Trump’s win and the company’s blockbuster third-quarter 2024 results led to the comeback. The EV maker was on a roller-coaster ride for most of this year but has enjoyed a solid rally recently. Last month's blockbuster earnings added $150 billion to the company's market valuation. Now, Trump's win is another catalyst for the stock. Tesla spiked 29% after Trump’s victory due to Musk’s all-in support for the Republican. This represents the best weekly performance since the week ended Jan. 27, 2023. Investors bet that Tesla will benefit from a potential Trump administration.A Trump BumpPer Wedbush Securities analyst, though Trump’s presidency could be an "overall negative for the EV industry," with the potential for EV rebates and tax incentives to be repealed, Tesla could benefit for a number of reasons. Tesla has the scale and scope that is unmatched in the EV industry and this dynamic could give the EV maker a clear competitive advantage in a non-EV subsidy environment. Additionally, the potential for higher China tariffs (as promised by Trump) would likely keep cheaper Chinese EV manufacturers like BYD and Nio (NIO) from flooding the U.S. market in the coming years.As Tesla CEO Elon Musk was a huge supporter of Trump's presidential campaign, the latter’s victory will help expedite regulatory approval of the company's autonomous driving technology. Musk has proposed a national standard for self-driving vehicles that would make it easier for the company to roll out the robotaxis planned for next year (read: Tesla ETFs Soar on Trump Win: Should You Buy, Hold or Sell?).Citing the potential for lighter regulation under the Trump administration that could boost the growth prospects of the company’s robotaxi, Bank of America raised the target price for Tesla to $350 from $265.Blockbuster EarningsThe electric automaker reported its biggest quarterly profit in more than a year and issued upbeat forecasts for 2025. Adjusted earnings per share came in at 72 cents, outpacing the Zacks Consensus Estimate of 58 cents and improving from the year-ago earnings of 66 cents. Revenues increased 8% year over year to $25.18 billion but were below the Zacks Consensus Estimate of $25.57 billion.  Earlier last month, Tesla returned to delivery growth in the third quarter after two consecutive quarters of decline and reported the third-largest quarterly number in the company's history. The return to growth shows that some of the incentives that Tesla had rolled out to boost demand are now paying off (read: Tesla Records its Best Day in 11 Years: 5 ETF Winners). Tesla’s chief executive, Elon Musk, expects vehicle sales to grow 20% to 30% next year and promised to launch an affordable vehicle, below $30,000 after subsidies, in the first half of 2025. Additionally, Tesla is working toward increasing production in the current quarter and said its new Cybertruck is on track to make a profit by the end of the year.Solid FundamentalsTesla, which joins the trillion-dollar club once again, currently has a Zacks Rank #1 (Strong Buy). It saw solid earnings estimate revisions of 20 cents for this year and 13 cents for the next over the past 30 days. The EV maker currently has a Wall Street analyst recommendation of 2.94 on a scale of 1 to 5 (Strong Buy to Strong Sell) made by 40 brokerage firms. This is up from 2.96 a month ago based on 39 recommendations. Of the 40 recommendations, 10 are Strong Buy and two are Buy. Strong Buy and Buy, respectively, account for 25% and 5% of all recommendations. Based on short-term price targets offered by 35 analysts, the average price target for Tesla comes to $217.36. The forecasts range from a low of $24.86 to a high of $315.00.High Valuation: A Cause of Concern?Tesla stock is expensive, trading at an exploding P/E ratio of 131.00 compared with that of Automotive - Domestic Industry’s 12.76 times. However, this valuation could be justified if Trump could really boost the company’s future growth prospects.ETFs in FocusThe ETFs with the largest exposure to this luxury carmaker could benefit most from the Tesla surge. These include Direxion Daily TSLA Bull 2X Shares TSLL, T-REX 2X Long Tesla Daily Target ETF TSLT, GraniteShares 2x Long TSLA Daily ETF TSLR, Tradr 1.5X Long TSLA Weekly ETF TSLW and GraniteShares 1.25x Long TSLA Daily ETF TSL.TSLL, TSLT and TSLR offer two times (200%) the daily percentage change of the common stock of Tesla. TSLW tracks 1.5X (150%) the weekly performance of Tesla while TSL offers 1.25 times (125%) the daily percentage change of the common stock of Tesla.Want key ETF info delivered straight to your inbox?Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.Get it free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. 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