Despite Bullish Forecasts, Wall Street Is Walking Away From Tesla

The bulls are still, well, bullish, when it comes to Tesla stock, but the rest of Wall Street seems increasingly nervous and that’s cost the EV maker fully half of its market capitalization since reaching a mid-December, post-election high. And one man appears to catch most of the blame: CEO Elon Musk. More from Headlight.News.

For more than a decade, it seemed like Elon Musk could do no wrong. Wall Street, in particular, saw the South African-born entrepreneur and his electric vehicle company as something of a second coming. Despite selling just 1.8 million vehicles in 2024, it hit a peak share price of $488.54 last December, driven in large part by Musk’s close association with then President-elect Donald Trump. Its market capitalization topped $1.5 trillion – more than the next dozen most valuable automakers combined.

There are still plenty of bulls who are convinced that was just the beginning. Widely followed Morgan Stanley auto analyst Adam Jonas sees the automaker’s shares surging to $800. That would put it into the stock stratosphere, with a market cap approaching Apple’s.

Investors, however, seem far from convinced, if anything, growing more concerned by the day. As it approaches three months since Tesla shares hit their peak, the automaker’s shares have lost roughly half their value, dropping below $240 by mid-morning, with little to indicate it’s hit rock bottom – as some analysts were expecting last week. And while there are plenty of headwinds that could help explain the current sell-off, more and more investors and analysts are pointing in one particular direction: at CEO Elon Musk.

From hero to zero?

These days, billionaires make as much news as the hottest Hollywood stars. But among the likes of Bill Gates, Mark Zuckerberg, Larry Ellison and Warren Buffett, none make headlines like Musk. That’s no surprise considering he defied conventional wisdom, building up a struggling automaker into a serious challenger to the established order. He then launched the groundbreaking SpaceX into a major factor in the space race. Musk developed a loud and loyal following, Apple News featuring a daily summary of stories focusing on the executive, Reddit and others devoting popular threads to his daily doings.

But things began to shift as Musk completed his $44 billion purchase of social media giant Twitter in October 2022. He took the soon-renamed X in a very different direction, lifting bans on far-right extremists, including racists, misogynists and neo-Nazis, while also bringing back Donald Trump as the former president began his effort to regain the White House. A year ago, Musk formally engaged in that campaign, eventually spending $277 million to back it – and the election bids of other Trump backers.

In turn, Trump has made Musk one of its top lieutenants, putting the Tesla CEO in charge of the newly created Department of Government Efficiency. DOGE has now claimed to have trimmed billions from federal spending. But its efforts have been controversial, especially in terms of the job cuts it’s made.

There’s been a growing backlash, especially as Musk has used X and other outlets to stake out an increasingly radical political position – and not just in the U.S. He backed the ultra-right AfD party in the run-up to recent German elections and has shouted out support for other conservative politicians and policies elsewhere in Europe.

Alienating his base

Since the Twitter purchase drew scrutiny to his politics, Musk has run increasingly afoul of the traditionally left-wing, environmentally focused base of Tesla buyers, noted Sam Abuelsamid, principal auto analyst at Telemetry Research.

Many of the once-friendly social media sites are now outlets for sharp criticism. Once loyal fans like suburban Detroiters Sandra and Dave Smith, and Bill McGuire say they’re looking to trade in their Teslas and switch to competing EV models. Singer Sheryl Crow last month sold her Tesla and donated the proceeds to National Public Radio, the network facing the threat of defunding by the Trump administration.

“My parents always said… you are who you hang out with,” Crow said in an Instagram post. “There comes a time when you have to decide who you are willing to align with. So long Tesla.”

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Other headwinds

Despite having one of its four global assembly plants in Berlin, Tesla sales in Germany were off 76% for the first two months of this year, even as overall EV registrations rose 31%, reported the German Federal Motor Transport Authority. In Europe, overall, the automaker experienced a roughly 50% decline.

Musk’s political turn is by no means the only factor working against Tesla. The automaker faces a variety of headwinds, including slowing EV sales growth, particularly in the United States. Ironically, things could get worse thanks to the policies of Donald Trump who has taken a number of steps likely to hurt sales of battery-electric vehicles. He wants to end federal support for a nationwide charging network, and roll back Biden-era rules that effectively served as EV sales mandates. Trump has signaled plans to end federal tax credits of up to $7,500 for EV buyers.

Then there are the tariffs that have briefly been put on hold for autos and auto parts coming in from Canada, Mexico and China. All three countries have countered with their own trade restraints which include limits on supplies of critical minerals, many of them needed for EV batteries. Two top candidates in the campaign to replace retiring Canadian Prime Minister Justin Trudeau are calling for 100% tariffs on Tesla products.

Wall Street in retreat

There are still plenty of optimists who are betting Tesla will regain positive momentum. Along with Morgan Stanley’s Jonas, Cathie Wood this month forecast the automaker’s market cap is on its way – after the current stumble – to $7 trillion. The ARK Invest founder and CEO called Musk “the inventor of our age,” during a Bloomberg podcast.

Like other bulls, Wood isn’t as much worried about the current downturn in Tesla sales as she is upbeat other opportunities the company has in AI, solar cells, battery backup systems, robots and autonomous vehicles. Musk has promised to launch the self-driving Cybercab in 2026 and Wood estimated it will generate GAAP gross margins running anywhere from 70 to 90%.

“We do believe that Tesla will be and is in the pole position here in the United States,” she proclaimed.

Other bulls have become more cautious, however. While the consensus still calls on investors to “hold” Tesla shares, 31 analysts who follow the stock now have lowered their average 12-month forecasts to $314.54, according to StockAnalysis.com. John Murphy, another widely followed figure, has cut his own estimate from $490 to $380 a share – which would still see a more than 60% rebound from where shares sit Monday morning.

Some, like Ronald Jewsikow, of Guggenheim, think the downturn will continue. He set a target price of $175. And Gordon Johnson, at GLJ Research, is the bottom outlier, with a 12-month target of just $25.

Is the “party over?”

Long-term Tesla stockholders know they need to keep a bottle of Tums on their desk and practice meditation. Shares have ridden a rollercoaster since the company went public. But the current downturn has more than a few observers wondering if a rebound is possible.

“Tesla’s stock defied gravity for years. Is Elon Musk’s EV party over?” read a Monday headline from Reuters. The accompanying article noted that many of the things that the bulls are betting on have yet to be launched. And other skeptics point out that Tesla has a long history not only of missing target dates but of failing to deliver all together. It is years past due on both the second-generation Roadster and the “affordable” EV that will prevent the company from being undercut by competitors like General Motors, Volkswagen, Hyundai and, in many markets, by emerging Chinese brands like BYD and Geely.

Where things go in the months ahead could depend upon several factors. To start with: will buyers continue to walk away from Tesla due to Musk’s politics? Certainly, weaker-than-expected first quarter sales and earnings could cause some panic. There’s also the question about whether Musk and company can deliver on some of the near-term promises being made. That will include the launch of robocabs serving the Austin market which are due later this year.

If Tesla and Musk continue to deliver weak performance numbers and again run late on their promises the bears may, indeed, prove prescient when it comes to Tesla stock.