Tesla’s Wild Ride: What’s Behind the Sudden Drop?
Tesla’s stock took a drastic tumble on Wednesday, plummeting over 8% and marking its steepest decline since the 2020 presidential election. This sudden drop comes after a remarkable 75% surge since Election Day, leaving investors stunned and confused.
A Disconnect from Fundamentals?
Analysts at Barclays have expressed concern that Tesla’s stock has become disconnected from its underlying fundamentals. With a hold rating and a $270 price target, they’re urging caution. The pullback coincided with a broader market downturn, including a 3.6% plunge in the Nasdaq.
Elon Musk’s New Role: A Game-Changer?
Tesla CEO Elon Musk, a major Trump supporter, is set to lead the “Department of Government Efficiency” in the Trump administration. This new role could grant Musk significant influence over federal agencies’ budgets, staffing, and regulations. Musk has already expressed his intention to use his sway to establish a federal approval process for autonomous vehicles.
Tesla’s Competition Heats Up
Meanwhile, Waymo, Tesla’s major domestic competitor, announced it had conducted over 4 million paid robotaxi trips in 2024. This milestone underscores the growing competition in the autonomous vehicle space.
The Elon Musk Factor
Tesla’s stock has often served as a proxy for an investment in Musk himself, and his new role has increased his value. However, this also exacerbates the already-high key man risk in Tesla stock, according to Barclays analysts.
Public Opinion Divided
A recent Quinnipiac poll found that 53% of voters in the U.S. do not approve of Musk playing a prominent role in the Trump administration. The split is significant across party and gender lines, with only 31% of women and 5% of Democrats approving of Musk’s new role.
SEC Investigation Looms
Musk has also complained about a “settlement demand” from the SEC tied to his sale of Tesla shares in 2022. The SEC has declined to comment, citing the need to preserve the integrity of its investigative process.
What’s Next for Tesla?
Tesla is set to report its fourth-quarter and year-end vehicle deliveries in January. Without a major new vehicle added to its lineup, the company has been relying on incentives like 0% financing to drive sales of its EVs. As the market continues to fluctuate, investors will be watching closely to see what’s next for Tesla.
Leave a Reply