Why Tesla’s stock has been cratering? Elon Musk may be President Trump’s first buddy, but Tesla ( TSLA ) investors have shifted to focusing more on the company’s fundamentals than the billionaire’s proximity to the Resolute desk.
Their decision?
To send Tesla’s stock tumbling less than two months into 2025.
Shares of the electric vehicle maker led by Musk are down 28% to $349.18 since hitting a record high on 18 December 2024, weeks after Trump’s Election-Day win.
The stock is the worst-performing member of the closely watched “Magnificent Seven,” which includes Meta (META), Amazon (AMZN), Microsoft (MSFT), Nvidia (NVDA), Google (GOOG), and Apple (AAPL).
At the time, enthusiasm was running high that Musk’s fierce support of Trump would unlock big-time profits as driverless cars would get quicker approval — among other bullish lines of thinking.
However, since reaching that peak, Tesla’s stock has fallen below its key 50-day moving average, according to Trading User Platform Finance data. The next test of investor sentiment on Tesla is coming at $334, or the 100-day moving average. Should the stock break below that critical support level, it could have a clear shot to the 200-day moving average of $286.
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Tesla’s 52-week low of $142.05 was hit on 22 April 2024.
“Given the considerable run-up in the shares as performance and expected future performance have by equal measure deteriorated, we sense a high risk of mean reversion (including by potential catalysts that may be difficult to foresee at present) and for this reason continue to recommend caution about an investment in Tesla shares,” JPMorgan analyst Ryan Brinkman wrote in a new client note.
Brinkman is one of the most bearish sell-side analysts on Tesla, with an Underperform rating and a $135 price target.
There are numerous reasons Tesla’s stock is under pressure.
For one, Tesla sales from important overseas markets have been soft since the start of the year. The readings have triggered some concerns in Tesla circles that Musk’s proximity to Trump damages its brand.
Tesla sold 63,238 vehicles in China in January, according to new data released this week from China Passenger Car Association (CPCA). The figure marked a steep 33% drop from December.
Australia’s Electric Vehicle Council (EVC) reported that Tesla’s overall sales fell 33% in January.
Meanwhile, fresh tariffs from President Trump stand to raise costs for Tesla and other EV makers.
On Monday, Trump signed two executive orders imposing new 25% tariffs on steel and aluminum, key raw materials used by Tesla.
Trump’s new trade war with China doesn’t help either. A 2023 study by Nikkei found that 40% of the suppliers of materials used in Tesla’s batteries are Chinese companies.
“Changes in government and economic policies, incentives or tariffs may also impact our production, sales, cost structure and the competitive landscape,” Tesla pointed out in its latest 10-K filing.
And lastly, Tesla’s fourth quarter left a lot to be desired.
The company’s EPS missed analyst estimates by a penny. Automotive sales fell 8% yearly due to price cuts across the Tesla vehicle lineup.
“They missed their 2024 delivery guidance, which we knew about a month ago. Their margins were pretty weak … And, if we’re reading this correctly, the full self-driving rollout in Europe and China is not going to happen in the first quarter,” Canaccord Genuity managing director George Gianarikas said on Trading User Platform Finance’s Morning Brief, calling the results “kind of squishy.”
Trading User Platform Finance data shows that analysts have aggressively marked down Tesla’s earnings per share estimates for 2025 and 2026 in the wake of the lackluster earnings report.
“Tesla faces a variety of risks given its broad reach. On automotive, we believe the largest risk is demand softness/stagnation related to EV fatigue and/or competition,” Deutsche Bank analyst Edison Yu pointed out in a note.
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