Is it a good time to invest in Tesla stock before January 20?

Tesla (TSLA 8.04%) is one of the most volatile megacap tech stocks. While owning Tesla has been (mostly) a great decision over the long term, timing has often been critical.

The company is working on several thrilling initiatives related to its electric vehicles and artificial intelligence (AI), yet I'm taking a cautious approach as an investor for now. In the following sections, I'll explain why January 20 might be a significant date for Tesla shareholders and discuss whether it would be wise to invest in the stock prior to that date.

Analyzing the fluctuations in Tesla's stock price

Let's break down Tesla's stock performance in 2024.

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Between Jan. 1 and Nov. 4, 2024, Tesla stock was down 2.3% and trailing the S&P 500 by a wide margin. However, shares were actually down as much as 42.8% at one point during this period.

Following Donald Trump's victory in the U.S. presidential election on Nov. 5, Tesla stock found new life. Between Nov. 4 and Dec. 31, shares gained 66.3%, and the company reclaimed its position in the trillion-dollar club.

Tesla CEO Elon Musk emerged as a major Trump supporter during the final months on the campaign trail. Investors began to see the Trump-Musk alliance as a bullish indicator for Tesla.

Although this might seem beneficial for Musk and the company, if you take a look at the stock's performance towards the end of the year, you'll notice that Tesla started to decline. As of now, shares have dropped 14.3% since Christmas Eve.

At the end of the year, it's quite typical for investors to sell stocks, particularly those from companies that have seen significant profits in a brief timeframe. Additionally, Tesla has recently released its delivery and production numbers for its electric vehicle division for the fourth quarter, revealing that they fell short of Wall Street's forecasts.

While Tesla's stock seems to be on a downward trajectory, I wouldn't be shocked if we witness a recovery in share prices as January 20 approaches. Let's explore the reasons behind this potential rebound.

What events are taking place on January 20?

On Jan. 20, President-elect Donald Trump will be sworn into office. Given Musk's ties to the soon-to-be president, I would not be shocked in the slightest if Tesla stock starts to see an uptick.

Here's the reality: While Musk's relationship with Trump may bode well for Tesla -- especially as it relates to a friendlier regulatory environment for the company's autonomous driving ambitions -- any gains leading up to or immediately following the inauguration are driven by a narrative, not Tesla's fundamentals.

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Is it a good idea to buy Tesla stock before that date?

Since the election, Tesla has fared much like a meme stock. Nothing about the company changed on Nov. 5. Nothing is going to change for it on Jan. 20, either. Investors don't know how the company's autonomous driving efforts will shake out or what regulatory changes the incoming administration will make in that area.

If you're considering investing in Tesla stock at this moment, it's essential to have faith in the company's future plans regarding AI, autonomous vehicles, and robotics. If you do, the timing of your share purchase becomes significantly less important.

Otherwise, investing in momentum stocks like Tesla is usually risky. If you have a low tolerance for risk, you may want to steer clear.