The stock market reacted positively after Donald Trump secured a second term in the White House. The S&P 500 Index ($SPX) is up nearly 28% year-to-date.
If you are worried about missing out on the post-election rally, Mad Money host Jim Cramer has identified a handful of stocks that could continue to outperform. Two standout names on that list are Tesla (TSLA) and ServiceNow (NOW).
Cramer believes Tesla's rally "has legs," and ServiceNow is "probably one of the best stocks in this entire market to buy." Both have outperformed the broader market's gains this year and could be good buys for the long haul.
Trump Stock #1: Tesla
Tesla is no longer just a maker of electric vehicles. In recent years, it has expanded into areas such as energy storage, robotics, and artificial intelligence (AI). However, its core EV business has struggled due to high competition and product saturation. With Trump in power, things could improve for the company, as CEO Elon Musk closely aligned himself with Trump during his 2024 presidential campaign.
Recently, Bloomberg reported that Trump's team is working to ease U.S. self-driving car regulations. With that hope, Tesla stock has rallied 70% year-to-date, outperforming the overall market.
Tesla’s third quarter results also impressed investors, following a string of disappointments. Tesla delivered 462,890 vehicles, a 6.4% increase year-over-year. Total revenue for the quarter increased by 8% to $25.2 billion, while adjusted earnings per share increased by 9%.
The company reported a gross margin of 19.8%, the highest level this year, following an ongoing streak of unimpressive margins due to price cuts. While Tesla's energy and services businesses expanded by 52% and 29%, respectively, its core automotive business only increased by 2%, which is concerning.
Prior to the earnings release, Tesla unveiled its much-anticipated two-seat robotaxi known as the "Cybercab." Musk stated that these AI-powered vehicles will begin production in 2026, costing less than $30,000. The company intends to launch 2 million Cybercabs per year. The company also intends to release more affordable models but did not provide specifics.
Analysts covering Tesla stock predict a 3.1% increase in revenue and a 20.4% decrease in earnings in 2024. However, revenue and earnings could rise by 16.4% and 31.8% in 2025, respectively.
What Does Wall Street Say About TSLA Stock?
Overall, on Wall Street, Tesla stock is a “Hold.” Out of the 38 analysts covering the stock, 11 have a “Strong Buy” recommendation, two rate it a “Moderate Buy,” 16 suggest it’s a “Hold,” and nine recommend a “Strong Sell.”
Tesla shares have surpassed both the average analyst target price of $245.68 and the high price estimate of $411. However, on Dec. 11, Goldman Sachs analyst Mark Delaney increased TSLA's target price from $250 to $345. While this suggests 23% downside potential, it reflects the analyst's confidence in the company's AI growth potential. Delaney maintained his "Hold" rating for the stock.
The lack of specific details about its upcoming products, improvements in Full Self-Driving (FSD), and the delay of the Optimus project have made a few analysts skeptical, which likely explains the stock's overall "Hold" rating.
The stock also trades at 204 times forward earnings estimates for 2025, which is significantly higher than other “Magnificent Seven” stocks and Tesla's historical average. While the company has tremendous long-term growth potential, investors may want to wait for a more favorable entry point.
Trump Stock #2: ServiceNow
ServiceNow operates in the cloud-based workflow automation and IT service management (ITSM) sectors. The company's flagship product, the Now Platform, serves as a versatile solution for managing IT workflows, employee workflows, and customer service workflows.
NOW stock has surged 63% year-to-date, compared to the broader market gain.
The majority of ServiceNow's revenue comes from subscriptions, which provide a predictable and recurring revenue stream. Total revenue increased by 22% year-over-year to $2.7 billion in the third quarter, with subscription revenue up 23%.
Remaining performance obligations (or RPO), which measure the amount of contracted revenue yet to be earned, totaled $19.5 billion. In the third quarter, net income per share increased by 27.4%, to $3.72.
The integration of AI into its platform improves workflow automation and predictive analytics, giving it a competitive advantage. During the quarter, the company introduced its Now Platform Xanadu, its largest AI release to date. According to the company, the platform includes new AI capabilities as well as built-in generative AI industry solutions for the "telecom, media, and technology; financial services; the public sector; and more" industries. It also intends to integrate Agentic AI into its NOW platform to increase daily productivity on a massive scale.
Under Trump's second term, the policy environment could be bolstered by pro-business and deregulation initiatives. As a result, ServiceNow earnings could potentially benefit from lower corporate tax rates.
Furthermore, deregulation in industries such as healthcare, energy, and financial services may result in increased business activity in these areas. ServiceNow's platform, which focuses on workflow automation, may see increased adoption as businesses grow. Furthermore, strategic acquisitions and partnerships with companies such as Nvidia (NVDA), Zoom (ZM), and Siemens (SIEGY) are enhancing ServiceNow's capabilities.
Management anticipates a 23% increase in subscription revenue for the full year. Analysts covering NOW expect revenue to grow by 22.4% this year, with earnings rising by 29%. Revenue and earnings might increase by 20.6% and 19.4%, respectively, in 2025. Trading at 17 times forward 2025 earnings, NOW is a reasonable tech stock to buy right now.
What Does Wall Street Say About NOW Stock?
Overall, Wall Street analysts are strongly bullish on ServiceNow, citing its fundamentals and growth prospects. Out of the 34 analysts covering the stock, 29 have a “Strong Buy” recommendation, two rate it a “Moderate Buy,” two suggest it’s a “Hold,” and one recommends a “Strong Sell.”
The stock has surpassed its average analyst target price of $1,027.20. However, its high price target of $1,250 implies that the stock could rise as much as 8.9% from current levels. Cramer believes NOW stock will touch $1,200.
The Bottom Line
Both Tesla and ServiceNow stand to benefit from policy and regulatory changes during Trump's second term. Tesla also has the long-term opportunity to expand into multiple disruptive industries such as EVs, renewable energy, and AI. However, given the competition and Tesla’s slow growth trajectory, there could be short-term headwinds along the way.
Meanwhile, ServiceNow's robust platform, proven track record of innovation, and expanding market potential align with the growing demand for digital transformation solutions, not just during Trump 2.0 but also in the long term.
I believe both companies have significant room for growth and are compelling investment opportunities for long-term growth-oriented investors.
