Tesla Inc. has seen its stock plummet 10.6% last week, continuing its downward trend with another 0.5% decline, marking the electric vehicle manufacturer’s shares at a two-month low. This drop follows a 25% retreat from its previous peak on December 17, when Tesla's stock was valued at $479.86. Despite this decline, the company’s shares still show a 43% rise since the recent election, highlighting the volatility of the market.
The public perception of CEO Elon Musk has significantly shifted as well. According to proprietary survey data from the Stifel Think Tank Group, Tesla’s net favorability rating has plummeted alarmingly to just 3% for the week ending January 27, 2025, down from 9% the previous year and drastically lower from 33% observed back in January 2018. This decline raises concerns about how Musk’s controversial political activities are affecting consumer sentiment.
These concerns drove Stifel analyst Stephen Gengaro to revise his price target for Tesla, reducing it from $492 to $474, and cutting his 2025 revenue forecast by 5% to $116.8 billion. The primary reason cited was Musk's increasing political involvement, which analysts believe is impacting consumer perception of Tesla's electric vehicles.
Adding to the uncertainty looming over Tesla is the change in policy under the Trump administration, which recently halted plans for a $5 billion program aimed at developing fast charger infrastructure across the U.S. Such decisions compound worries about the future of EV development and investment within the country. Multiple sources report this policy shift may significantly hamper EV infrastructure's growth, increasing the competitive disadvantage Tesla faces.
Following disappointing results from its fourth-quarter earnings report, where Tesla missed both per-share profit and revenue predictions, analysts noted investor sentiment took another hit. Tesla’s outlook for the future also failed to inspire confidence, triggering additional sell-offs from cautious investors.
Despite the turmoil, over the past year, Tesla shares have exhibited some resilience, witnessing an impressive 86% increase, significantly outpacing the S&P 500's gain of 20.5%. This showcases how volatile the market can be; price drops do not instantaneously translate to; historically, Toyota has faced similar struggles yet emerged strongly. Today's market reflects similar patterns amid broader economic conditions.
The overall U.S. market appears tepid, with the Market Index recently down 0.25%. Strong employment data indicating unemployment at 4% coupled with hourly wages up 4.1% year-over-year has continued to cast doubts on prospective interest rate cuts, leading market analysts to project only modest reductions by year-end.
Internationally, Tesla is encountering challenges as well. Reports indicate sales are tumbling not only within the U.S. but also overseas, particularly notable declines are appearing in Europe and China. The risk becomes amplified as Tesla faces stricter competition from local automakers. Recent action from competitors like BYD, which has announced lowering entry-level vehicle prices below $10,000, and XPeng's 0% financing promotions signal potential price wars.
Oppenheimer analysts chimed in, stating, "We see increasing risks to Street estimates for TSLA as EV and AV competition intensifies." This encapsulates the current stakes for Tesla as market conditions shift, highlighting the potential pressure on Tesla's market share.
The situation is made more convoluted by Musk’s recent bid to acquire OpenAI, which has raised fears among investors. Many are concerned he might need to liquidate more of his Tesla stock to finance this $97 billion deal, considering Musk's substantial ownership stake within Tesla. Previously, he faced similar scrutiny when making significant sales to fund his acquisition of Twitter, leading to noticeable impacts on stock prices.
The potential for price pressure on Tesla shares continues to grow as other high-ranking Tesla executives have also recently sold portions of their holdings. Kimbal Musk's sale of 75,000 shares just days before the OpenAI bid surfaced raises eyebrows, particularly knowing he has had history of savvy market timing.
Looking forward, Tesla aims to bounce back by launching lower-priced vehicles anticipated to hit the market by early 2025. Also, initiatives like the public debut of Full Self-Driving technology this year, combined with ramp-up production of Optimus robots, signal Tesla's efforts to diversify and secure new financial inflows.
While the Fed emphasizes the economy's strength, concerns of potential inflation are likely to influence broader market conditions impacting all automakers, including Tesla. The impacts resulting from the recent policy shift concerning EV infrastructure pose additional questions. The market remains abuzz with speculation as Tesla seeks to regain traction amid rising competition.
The current trading trends for Tesla reflect broader shifts within consumer cyclical stocks, which are under increasing pressure, posting declines of about 3.1%. The electric vehicle industry, including major players like Tesla and Amazon, has faced strong market reactions. With investors eyeing the impending earnings season, one thing is certain: the road may be bumpy for Tesla as they strive to redefine themselves at this pivotal moment.