Tesla Stock Tumbles: Musk's Support for Trump Takes Backseat to Fundamentals
Elon Musk's close relationship with President Trump may have initially buoyed Tesla (TSLA) shares, but investors are now prioritizing the company's fundamentals. After a record high in December 2024, Tesla's stock has plummeted 28% to $349.18, making it the worst performer among the "Magnificent Seven" tech giants (Meta, Amazon, Microsoft, Nvidia, Google, and Apple).
The decline stems from concerns about Tesla's financial performance, soft sales in key overseas markets, geopolitical factors, and a disappointing fourth quarter.
Fundamentals Under Scrutiny
Tesla's EPS missed estimates by a penny in Q4 2024, while automotive sales fell 8% year-over-year due to price cuts. Analysts have subsequently downgraded their earnings per share estimates for 2025 and 2026.
Overseas Market Woes
Tesla's sales in China fell 33% in January 2025, while in Australia, sales declined 33% year-over-year. These declines have raised concerns that Musk's association with Trump may be damaging the brand's image.
Geopolitical Headwinds
President Trump's new tariffs on steel and aluminum, as well as ongoing trade tensions with China, could increase costs for Tesla. A Nikkei study found that 40% of Tesla's battery material suppliers are Chinese companies.
Disappointing Q4 Performance
Tesla's fourth quarter report missed expectations on both earnings and sales, contributing to the stock's decline.
Analyst Sentiment
JPMorgan analyst Ryan Brinkman reiterates his Underperform rating and $135 price target, citing the potential for "mean reversion" and a "high risk of future performance deterioration."
Deutsche Bank analyst Edison Yu highlights the risk of demand softness due to EV fatigue and competition.
Conclusion
Tesla's stock decline reflects a shift in investor focus from Musk's political connections to the company's underlying performance. Concerns about fundamentals, overseas markets, geopolitical factors, and a disappointing fourth quarter have overshadowed any potential benefits from Musk's relationship with Trump.