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Stock posts second loss in 11 days as post-election fervor has raised some valuation risk heading into what should be a bullish 2025

Shares of Tesla Inc. fell Wednesday, a rarity this month, but that could actually help make them more attractive for investors.

Baird analyst Ben Kallo is still bullish on the electric-vehicle giant $(TSLA)$, and gave a number of reasons why 2025 should be a good year for the stock.

But the big spike since the election, which has put a "bright spotlight" on Chief Executive Elon Musk's ties to President-elect Donald Trump, has raised some concern over valuation.

So while Kallo said he remains a buyer of the stock, he recommends investors do so "particularly on pullbacks."

The stock sank 8.3% on Wednesday, after closing at record highs for the past three sessions. The decline was just Tesla's second over the past 11 sessions, and just the third decline in December.

Since the election, the stock has rocketed 89.1%, as Tesla's market capitalization ballooned by $719.1 billion over that time to $1.53 trillion. And the value of Musk's stake in the company, which was 20.5% according to the latest disclosure, has swelled by $160.2 billion since the election to about $340 billion.

Baird's Kallo reiterated his outperform rating on the stock and raised his price target to $480 from $280. The new target is just 1% above current levels.

"The stock has gained significant momentum and has several upcoming potential catalysts," Kallo wrote in a note to clients. "We like the stock long term and would be buyers on pullbacks."

Below are Kallo's reasons to be bullish for 2025, but also some concerns:

Bull arguments

-- Introduction of new vehicles will help grow volume.

-- Factory utilization will increase.

-- Expected removal of an EV tax credit in the U.S. by the Trump administration is a negative on an absolute basis, but a positive for Tesla relative to competitors, who will be hurt more.

-- Production costs are falling for the Model 3, Model X and Model Y vehicles and for the Cybertruck.

-- Automotive regulatory credits provide a boost as other OEMs fall behind emissions standards.

-- Expansion into new markets.

-- Favorable legislation under a Trump administration, particularly on full self-driving and the rollout of Tesla's Cybercab robotaxi.

-- Continued investment in artificial intelligence through autonomy, Dojo compute and the Optimus robot.

-- Growth in Tesla's energy business.

-- First Optimus robots deployed in Tesla's factories.

-- FSD approval in China and the European Union.

Bear arguments

-- Valuation.

-- Sales will be "lumpy" as new vehicles are introduced.

-- Margins will face headwinds with lower-priced vehicles.

-- Robotaxi rollout delays or car accidents.

-- Geopolitical risk, such as a trade war with China, as Shanghai represents a major profit center for Tesla.

-- Emphasis on "key-man" risk related to Elon Musk spreading his time thin.

-- Pushout of timeline for long-dated initiatives, such as scaled robotaxi service and/or Optimus.

-- EV tax credit removal could be a bigger negative for demand than expected.