November 25, 2024 at 2:15 PM Tesla stock (TSLA) is down Monday following a strong recent run-up as one Wall Street bank says “animal spirits” have pushed the stock beyond any “fundamental change” at the company. Joseph Spak at UBS noted that Tesla stock has surged around 40% since the election, adding over $350 million to its market cap. While some of President-elect Donald Trump's policy proposals could favor Tesla, there are some policy negatives as well that would hurt fundamentals more than where the theoretical upside has taken the stock. “The rise in Tesla stock is mostly driven by animal spirits/momentum (which has happened multiple times in TSLA’s history),” Spak wrote. Tesla stock is down around 1% in midday trade, coming after Spak and UBS reiterated a rare Sell rating with a price target hike, to $226 from $197, for Tesla. Investors took Tesla stock to multiyear highs following Trump’s election win, mainly on the back of CEO Elon Musk’s full-throated endorsement of Trump. In return, Trump has unofficially placed Musk in his inner circle, allowed him to sit in on policy meetings, and named him to run a government efficiency council. Trump has also said his view on electric vehicles has improved due to Musk’s presence, though reports from the transition team claim the federal EV tax credit could be on the chopping block. While the removal of tax credits could hurt Tesla’s competitors more than Tesla itself, the calculation is not that simple. “The removal of consumer tax credits is not an absolute positive for US EV (and TSLA) demand. TSLA may have some new models/refreshes on the way which could help. But, we've seen pricing action (not including tax credits) only stabilize demand. So if credits go away, further pricing actions may be needed,” Spak wrote. The other bullish outcome for Tesla from Trump’s win is a more friendly regulatory environment, especially for Tesla’s robotaxi rollout. The Tesla Cybercab is displayed at the AutoMobility LA auto show in Los Angeles, Thursday, Nov. 21, 2024. (AP Photo/Jae C. Hong) (ASSOCIATED PRESS) While there is a view that an easier regulatory “hurdle” is positive for Tesla’s robotaxi service, there is tempered by the fact that there really aren't any onerous federal autonomous vehicle regulations to "relax," Spak wrote, as the bigger issues are dealt with on a state-by-state basis. In fact, the bigger robotaxi challenge could be the technology itself. “A change in regulation doesn't immediately solve, nor change the timeline to solve, the technological challenge of unsupervised [Full Self-Driving],” Spak wrote. “We continue to believe that FSD is improving, but the product is not ready for wide scale robotaxi deployment.” As for the hike with his price target, Spak said stock is essentially at his prior upside case valuation, and using the bank’s 57 times forward 2026 price-earnings ratio nets a $226 price target which is well below the current stock price. Spak isn’t here to pour cold water on Tesla’s recent monster move. He just isn’t buying it from a fundamental point of view, especially over the long run. For Tesla and its 40% rally in less than a month, that often doesn’t matter. “From a narrative perspective, especially if one were valuation agnostic, we get it,” Spak said. StockStory aims to help individual investors beat the market. Pras Subramanian is a reporter for Yahoo Finance. You can follow him on X and on Instagram.