After weeks of escalating tension between two of America’s most high-profile figures — Elon Musk and President Donald Trump — a surprising shift in tone has emerged. In a recent post, Trump denied claims that he intends to “destroy” Musk’s companies, including Tesla (TSLA) and SpaceX, insisting instead that he wants Musk to “THRIVE like never before.” The statement appeared to be an olive branch, but does it really change the equation for Tesla?
In this article, we’ll unpack the implications of Trump’s recent statements and explore whether TSLA stock is truly a safe buy today, or if investors should brace for further turbulence ahead.
With that, let’s dive in!
About Tesla Stock
Tesla (TSLA) is a prominent innovator dedicated to accelerating the global transition to sustainable energy. The Elon Musk-led powerhouse designs, develops, manufactures, leases, and sells high-performance fully electric vehicles, solar energy generation systems, and energy storage products. It also offers maintenance, installation, operation, charging, insurance, financial, and various other services related to its products. In addition, the company is increasingly focusing on products and services centered around AI, robotics, and automation. TSLA has a market cap of $1.02 trillion.
Shares of the EV maker have fallen 21.7% on a year-to-date basis. Tesla faced renewed selling pressure following its Q2 earnings report, after CEO Elon Musk warned of tough times ahead for the company as incentives like the EV tax credit phase out in the U.S. Still, the recent U.S.-EU trade agreement and Tesla’s $16.5 billion deal with Samsung to manufacture next-generation chips provided some relief, helping to protect the stock from further losses.
Trump Says He Won’t ‘Destroy’ Musk’s Companies — But Does It Matter Anymore?
Last Thursday, President Donald Trump dismissed allegations that he intends to undermine Elon Musk’s companies or their work with the U.S. government. “Everyone is stating that I will destroy Elon’s companies by taking away some, if not all, of the large-scale subsidies he receives from the U.S. Government. This is not so!” Trump said in a post to Truth Social. The president, who has repeatedly threatened to revoke Musk’s government contracts and subsidies since their public feud last month, emphasized that he wants Musk to “THRIVE like never before.”
The post seemed to be an attempt to ease tensions in the feud. In June, Trump threatened to cut some of Musk’s government contracts as tensions escalated between the two over the president’s “One Big Beautiful Bill” and their relationship unraveled. Still, in a post on X, Musk insisted that his companies do not receive any special subsidies or preferential contracts from the federal government, effectively rejecting what appeared to be a peace offering from Trump. “The ‘subsidies’ he’s talking about simply do not exist,” Musk wrote.
Musk then alleged that Trump, whom he referred to only as “DJT,” had “already removed or put an expiry date on all sustainable energy support while leaving massive oil & gas subsidies untouched,” taking a swipe at the president’s sweeping spending bill that eliminated the $7,500 federal EV tax credit. Besides phasing out tax credits for EV purchases, the law also dismantled federal fuel-economy standards that have been a significant source of revenue for Tesla over the years. According to FedScout, Tesla has generated $12.24 billion in revenue from the sale of “automotive regulatory credits,” also known as environmental credits, since 2015. During the Q2 earnings call, Musk cautioned that Tesla could face “a few rough quarters” as a result of tariff-related costs and the expiration of federal EV incentives at the end of September.
In its most recent 10-Q filing, Tesla referenced Trump’s “One Big Beautiful Bill Act” using its initials, OBBBA, in the Risk Factors section. “The loss of previously available tax credits and carbon offset mechanisms may further negatively impact our financial results,” according to the filing. In addition, the company said that “provisions of the OBBBA could affect battery cell expenses and impact costs for our consumers, negatively impacting demand.”
Musk also dismissed claims that his rocket company, SpaceX, was receiving preferential treatment, stating that “SpaceX won the NASA contracts by doing a better job for less money.” Musk argued that moving SpaceX’s contracts to “other aerospace companies would leave astronauts stranded and taxpayers on the hook for twice as much!”
Meanwhile, a recent report from the Wall Street Journal appeared to confirm Musk’s claims regarding SpaceX. The report stated that the Trump administration had recently reviewed SpaceX’s federal contracts to assess potential areas for cuts. However, the review found that most of the contracts were critical. Notably, SpaceX has received more than $22 billion through federal government contracts since 2008, according to FedScout.
To sum up, Trump’s recent remarks don’t make TSLA stock a safe buy, as his tax bill has already dealt a blow to the company — regardless of what he now says. With that, let’s shift our focus to the company’s recent earnings report for a closer look.
Tesla’s Struggles Persist With More Challenges on the Horizon
On July 24, TSLA stock dropped more than 8% after the company reported its steepest revenue decline in at least a decade, with CEO Elon Musk cautioning about challenging times ahead. Musk said that Tesla is entering a transition period that could last a year or longer, as it loses U.S. electric vehicle incentives and requires time to roll out its autonomous vehicles. “We probably could have a few rough quarters,” he noted. Musk’s remarks were his most direct yet regarding the impact of the tax bill signed by President Donald Trump this month on Tesla. I covered TSLA’s Q2 results in depth in my previous article, so here I’ll briefly highlight the headline numbers and focus more on the fallout from the tax bill.
Tesla’s total revenue stood at $22.5 billion, down 11.8% year-over-year and the sharpest decline since 2012. Its adjusted EPS slumped 23% year-over-year to $0.40, but was in line with expectations. The company’s core automotive business continued to struggle amid intensifying competition and backlash from Musk’s political activities. Revenue from the automotive segment declined 16% year-over-year to $16.7 billion due to lower vehicle deliveries, falling average selling prices, and lower revenue from regulatory credit sales. And this is where it gets most interesting.
Revenue from regulatory compliance credits that Tesla sells to rival automakers fell to $439 million in Q2, down 26% from the first quarter and 51% year-over-year. This revenue stream is now at risk following the tax law signed by Trump this month, which removed penalties automakers previously faced for not meeting federal fuel-economy standards. Most importantly, revenue from regulatory credit sales flows directly to Tesla’s bottom line.
Trump’s tax bill is poised to eliminate penalties for automakers that fail to meet the National Highway Traffic Safety Administration’s Corporate Average Fuel Economy (CAFE) standards, which are a key driver of demand for these regulatory credits. The future of two other credit sources — those from the U.S. Environmental Protection Agency and California’s zero-emission vehicle program — remains uncertain due to proposed rule changes and political and legal challenges.
Earlier this month, William Blair analysts estimated that roughly 75% of Tesla’s credit revenue is derived from CAFE standards. Just days after the new law was enacted, they cut their estimate for the company’s 2025 credit revenue by nearly 40%, bringing it down to around $1.5 billion. The analysts project it will drop to $595 million next year and be completely wiped out in 2027. “The elimination of the CAFE fines requires a reset in expectations,” the William Blair analysts said in a note.
What Do Analysts Expect for TSLA Stock?
Wall Street analysts remain divided on Tesla, as the stock currently holds a consensus rating of “Hold.” Of the 41 analysts covering the stock, 12 rate it a “Strong Buy,” two label it a “Moderate Buy,” 17 suggest holding, and 10 have assigned a “Strong Sell” rating. Notably, the stock currently trades at a premium to its average price target of $299.28. The company’s valuation reflects a similar trend, with a forward non-GAAP price-earnings ratio of 190.14x, well above both the sector median and its own 5-year average. The premium stems from investors’ confidence in Musk’s promises surrounding artificial intelligence, robotics, and self-driving technology.
Meanwhile, analysts tracking the company anticipate a 30.38% year-over-year decline in its adjusted EPS to $1.68 for fiscal 2025, with revenue expected to drop 5.19% year-over-year to $92.62 billion.
The Bottom Line on TSLA Stock
Putting it all together, as I noted earlier, TSLA doesn’t appear to be a safe buy in light of Trump’s recent remarks. Actions speak louder than words — and Trump’s tax legislation has already significantly damaged Tesla’s financial outlook. On top of that, the company’s valuation looks expensive even for a high-growth company, but Tesla doesn’t look like a growth story anymore, with both its revenue and earnings projected to decline this year.
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
