With shares up 38% since Nov. 5, Tesla (TSLA 3.69%) has been a huge beneficiary of Trump’s presidential election victory. CEO Elon Musk played a key role in the campaign, and many investors believe his company stands to benefit from the new economic and regulatory framework.

That said, Tesla’s situation isn’t all peaches and cream. Let’s discuss some pros and cons of investing in the stock.

Core automotive operations have matured

While Tesla benefited tremendously from being an early mover to the electric vehicle (EV) opportunity, its edge in brand recognition and technology seems to be stalling. Third-quarter revenue grew by a measly 2% year over year to $20 billion — a far cry from the 74% growth the company posted in the corresponding quarter three years ago.

To be fair, Tesla is a victim of its own success. The company’s Model Y is the best-selling car on the planet, beating out established mass-market rivals like the Toyota Corolla or Rav4. The company’s sheer scale will make it challenging to generate continued growth because most people who want a Tesla vehicle probably already have one.

The good news is that Tesla is still an exceptionally well-managed, lean business capable of maintaining its margins. Despite the flat revenue, the company increased its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 24% to $4.7 billion. While the automotive business no longer looks like a key growth driver, it can serve as a stable cash cow as management pivots to other opportunities.

What does Trump’s reelection mean for Tesla?

Elon Musk stumped for the Trump campaign and donated at least $132 million to the effort through his super PAC, America PAC. However, while Trump’s victory has led to a surge in Tesla stock, it is unclear how the new administration’s policies will impact the company’s top and bottom lines.

According to Reuters, Trump’s transition team aims to end the Biden-era tax credit for EVs. This $7,500 subsidy makes electric cars more affordable relative to their gas-consuming peers, likely helping their sales.

Trump has also promised to cut back on outsourced manufacturing, which could run contrary to Tesla’s ambition to build a new factory in Mexico.

Image source: Getty Images.

All that said, Musk still seems confident in America’s Trump-led future. And while the loss of subsidies could hurt demand for Tesla cars, Musk’s company may be better able to compete in a more competitive environment because of its economies of scale and manufacturing expertise. The Trump administration could also ease some regulations around Tesla’s other growth opportunities like self-driving cars, robotics, and artificial intelligence. These businesses could become increasingly important for Tesla as its EV growth continues to slow down.

The valuation seems far too optimistic

All in all, Tesla seems to be in a pretty neutral situation: not particularly good or bad. Core automotive growth has slowed dramatically, but margins and profitability remain strong. And while nonautomotive opportunities (like self-driving cars) could become key growth drivers, it could take years or even decades for that story to play out.

Trump’s election victory also doesn’t seem likely to significantly impact Tesla’s near-term prospects. So, the recent rally seems overdone.

With a forward price-to-earnings (P/E) multiple of 103, Tesla’s valuation looks very out of line with the company’s fundamentals. And while it is still a fantastic company, it isn’t a buy at this price. Investors should wait for a better entry point before considering a position in the stock.