TLDR:
- Tesla stock has dropped approximately 40% year-to-date, underperforming the S&P 500
- A lawsuit alleges Tesla manipulated odometers to avoid warranty claims, though CEO Elon Musk dismissed it as “idiotic”
- Q1 2025 earnings report due Tuesday with expected EPS of 39 cents, down from 45 cents last year
- Former bull Dan Ives warns of “brand crisis” due to Musk’s political involvement
- Q1 deliveries fell 13% while the broader EV market grew 29%
Tesla is facing pressure from multiple directions as its stock continues to slide. The company’s shares were down 3.5% in early Monday trading at $232.88, with year-to-date losses approaching 40%.
The electric vehicle maker faces a new lawsuit alleging odometer manipulation. Filed by Nyree Hinton, the suit claims Tesla sped up odometers to avoid warranty claims by artificially adding mileage.
CEO Elon Musk responded over the weekend on social media, calling the allegations “idiotic.” The company has not issued an official response to the claims.
While odometer tampering is a serious issue, Tesla’s warranty expenses don’t appear unusual. The company’s 2024 warranty provision was $2.7 billion, representing about 3.5% of automotive sales, compared to General Motors’ provision of approximately 2.3% of sales.
Political Backlash Hits Sales
The bigger issue for Tesla may be Musk’s political activities. Dan Ives, previously one of Wall Street’s biggest Tesla bulls, warns the company has reached a crossroads.
Ives, an analyst at Wedbush Securities, sees Musk’s political involvement creating a “brand crisis” for Tesla. He recently cut his target price to $315 per share, reflecting growing concerns.
Initially, Ives had expected Musk’s support of Donald Trump during the 2024 election would benefit Tesla. He had anticipated the relationship would help eliminate regulatory barriers for autonomous driving technology.
The opposite has occurred. Tesla now faces 25% tariffs on imported parts under the Trump administration, while Musk’s polarizing political profile has turned off potential customers globally.
Sales and Market Share Decline
The impact is evident in Tesla’s first-quarter results. Deliveries dropped 13% to their lowest level in three years, despite the broader electric car market growing by 29%.
Tesla’s market share has declined across all major markets. The company lost 9 percentage points in both the U.S. and Europe, along with 4 percentage points in China.
Wall Street analysts have cut their earnings estimates for Tesla. The consensus now expects earnings to increase at 18% annually through 2026, down significantly from earlier projections.
For the first quarter of 2025, analysts expect earnings per share of approximately 39 cents, down from 45 cents in the same period last year. First-quarter deliveries of approximately 337,000 vehicles were down from 387,000 a year ago and about 40,000 below Wall Street projections.
Future Growth Prospects
Despite current challenges, Tesla has major opportunities on the horizon. The company plans to launch robotaxi services in June, followed by potential commercialization of Optimus humanoid robots next year.
Both markets represent multi-trillion-dollar opportunities. If Tesla meets its deadlines, earnings could grow more quickly than current estimates suggest.
On the fourth-quarter earnings call, Musk made bold claims about Tesla’s future value. He suggested the company could eventually become “the most valuable company in the world, perhaps worth more than the next five companies combined,” primarily due to autonomous vehicles and robots.
Investors shouldn’t ignore lawsuits, but Tuesday’s earnings report and management’s outlook for the year ahead will likely have a much bigger impact on stock movement this week.
Wall Street will be paying close attention to what Musk and his team say about sales recovery plans, progress on autonomous technology, and whether the CEO will refocus on Tesla’s core business.
For investors considering the stock, much depends on whether Musk can address brand challenges and deliver on ambitious technology promises. Those uncomfortable with execution risk might want to avoid Tesla for now.
Those who believe in the company’s long-term vision might see the current 50% drop from December’s high of $480 as a buying opportunity. The stock’s current valuation of 100 times earnings reflects high expectations for future growth.
Whether Tesla can meet those expectations will depend largely on Musk’s ability to navigate both technological and political challenges in the months ahead.
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