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The electric vehicle (EV) market leader, Tesla (TSLA), has been the most talked-about stock this month, owing to public spats between CEO Elon Musk and President Donald Trump over tax and spending policies. Musk was a strong supporter of Trump’s re-election campaign and served as the head of Trump’s Department of Government Efficiency (DOGE). This alignment initially boosted Tesla stock on the promise of reduced regulation and ongoing EV incentives.
However, the dynamic shifted dramatically this month when Musk publicly criticized Trump’s “One Big Beautiful Bill” for containing tax-and-spend provisions and reducing EV subsidies. According to CNBC, Trump responded by threatening to cancel Tesla and SpaceX government contracts and removing EV tax credits.
Tesla shares plunged 14.2% in a single day, coinciding with Trump’s contract-threat tweets. Despite modest rebounds, Tesla stock is down 19.5% year-to-date, trailing both the broader market and the other “Magnificent Seven” stocks.
What’s Fueling the Bearish Case?
The timing of this feud couldn’t have been worse. Tesla has already been under pressure after reporting weaker-than-expected first-quarter results in April due to slowing demand and increased competition. Furthermore, Musk’s involvement in politics sparked boycotts, protests at Tesla stores, and shareholder exits, destroying the brand’s image. Total revenue decreased by 9% year-over-year to $19.3 billion, while adjusted earnings fell by 40%. Total deliveries fell 13%. Its core automotive business is struggling, having dipped 20% during the quarter. However, a 67% increase in energy generation and storage revenue and a 15% increase in services and other revenue offset the damage to its core business. The company is set to begin its robotaxi rollout, which will include Tesla’s Full Self-Driving (FSD) capabilities, on June 12, which will have a significant impact on its future valuation. Many analysts and investors are concerned that the political conflict has overshadowed the launch. Furthermore, increased competition from BYD (BYDDY), Ford (F), General Motors (GM), and Rivian (RIVN) is reducing Tesla’ smarket share.
While Musk claims that hundreds of thousands of robotaxis will be on the road by 2026, Baird analysts estimate only 6,000, citing technical, regulatory, and production bottlenecks.
Analysts predict that Tesla’s earnings will fall by 21.8% in 2025 before increasing by 50.9% in 2026. Tesla stock trades at a forward P/E ratio of 108x, which is extremely high in light of slowing growth, declining margins, and softening EV demand.
What Do Analysts Say About Tesla Stock?
In response to the feud, some firms downgraded Tesla. Robert W. Baird analyst Ben Kallo downgraded the stock from “Buy” to “Hold” with a target price of $320. According to Kallo, Musk’s political entanglements, rising brand damage, robotaxi overoptimism, and growing competition from Chinese EVs all add uncertainty to the stock’s short-term outlook. However, the analyst continues to believe Tesla has long-term potential.
Similarly, Argus Research lowered its rating from “Buy” to “Hold.” Analyst Bill Selesky believes Tesla is being driven by “non-fundamental events,” such as political drama, weakening U.S. EV demand, and increased competition from other EV makers.
What’s more, according to Barclays analyst Dan Levy, the recent drop in Tesla shares could be a preemptive “sell the news” reaction ahead of the highly anticipated Robotaxi event on June 12. Levy recognized Tesla’s impressive progress in autonomy and the significant opportunity within the total addressable market. However, he cautioned that investor expectations may be unrealistic given the challenges of scaling robotaxi technology. Barclays maintains an “Equal Weight” rating for Tesla with a $275 price target.
Overall, on Wall Street, Tesla stock remains a “Hold.” Of the 41 analysts covering the stock, 14 recommend it as a “Strong Buy,” two as a “Moderate Buy,” 15 as a “Hold,” and 10 as a “Strong Sell.” Tesla has surpassed its average analyst target price of $291.89. The high price estimate of $500 implies that the stock can rise by 53.4% in the next 12 months.
The Key Takeaway
Despite the noise, Tesla remains a market leader in EVs and autonomy, with unrivaled scale, charging infrastructure, and R&D. Its robotaxi initiative still has transformative potential, even if it is delayed or on a smaller scale. However, in the short term, it is entangled in a high-stakes political drama.
For risk-averse investors, the ongoing feud and volatility warrant caution. However, for long-term investors who believe Tesla’s technological edge and policy environment will eventually normalize, this pullback may provide a rare opportunity to buy the stock on the dip.
