TLDR
- Tesla stock dropped 10.6% last week and continued falling, reaching a two-month low with an additional 0.5% decline
- Consumer opinion of Elon Musk has significantly declined, with Tesla’s net favorability rating falling from 33% in 2018 to just 3% in January 2025
- Trump administration policies targeting EV incentives and charging infrastructure are creating market uncertainty
- Despite recent declines, Tesla stock remains at a 44% premium to Morningstar’s estimated fair value
- Tesla faces challenges in overseas markets while planning to launch a lower-priced vehicle in early 2025
Tesla’s stock continues its downward trajectory in February 2025, marking a four-day losing streak with an additional 0.5% decline following last week’s 10.6% drop. The electric vehicle maker’s shares have retreated 25% from their December 17 peak of $479.86, despite maintaining a 43% gain since the recent election.
The decline comes amid growing concerns about CEO Elon Musk’s public image and its effect on consumer sentiment. According to Stifel Think Tank Group’s proprietary survey data, Tesla’s net favorability rating has plummeted to 3% for the week ending January 27, 2025, down from 9% in January 2024. This marks a dramatic shift from January 2018, when the rating stood at 33%.
Stifel analyst Stephen Gengaro has responded to these developments by lowering his price target for Tesla from $492 to $474. He also reduced his 2025 revenue forecast by 5% to $116.8 billion, citing Musk’s political involvement as a key factor affecting consumer perception of Tesla’s electric vehicles.
The company’s challenges extend beyond public perception. The Trump administration’s recent policy decisions have created uncertainty in the electric vehicle market. The administration halted a $5 billion program designed to build fast chargers on highways, raising questions about the future of EV infrastructure development in the United States.
Tesla’s fourth-quarter earnings report fell short of expectations, missing targets for both per-share profit and revenue. The company’s outlook also disappointed investors, contributing to the recent stock decline. However, despite these setbacks, Tesla’s stock has shown strong performance over the past 12 months, rising 86% compared to the S&P 500’s 20.5% advance.
The broader market context shows the US Market Index down 0.25% following a sharp Friday decline, influenced by strong employment data showing unemployment at 4% and hourly wages rising 4.1% year over year. This economic strength has tempered expectations for interest rate cuts, with CME’s FedWatch indicating only a 50 basis point reduction likely before year’s end.
Looking at Tesla’s valuation, Morningstar analysts note that despite the recent price decline, the stock still trades at a 44% premium to their estimated fair value. This serves as a reminder that price drops don’t automatically create good value opportunities.
In overseas markets, Tesla faces additional hurdles. The company has experienced declining sales in Europe, and similar trends are emerging in China, a crucial market for the automaker’s global growth strategy.
The company’s trailing four-week average for net purchase consideration has declined to near fresh lows, continuing a downward trend observed in recent years. This metric, combined with falling favorability ratings, suggests potential headwinds for future sales.
Despite these challenges, Tesla maintains several positive developments. The company achieved record low costs of goods sold in the fourth quarter of 2024. Plans are in place to launch a lower-priced vehicle in the first half of 2025, which could help expand market reach.
Additional initiatives include the anticipated public debut of Full Self-Driving technology this year and the ramping up of production for Optimus robots, representing potential new revenue streams for the company.
Federal Reserve officials have emphasized the economy’s strength and inflation risks, indicating a cautious approach to future rate adjustments. This monetary policy stance could influence market conditions for all automakers, including Tesla.
The impact of Trump’s order on EV chargers remains uncertain, given the limited allocations of National Electric Vehicle Infrastructure funding to date. However, the policy shift creates additional market uncertainty for the entire EV sector.
Consumer cyclical stocks as a whole have felt pressure, with the sector falling 3.1%. Tesla’s decline has occurred alongside other market leaders, including Amazon, which saw a 3.6% drop despite beating earnings expectations.
For the broader market, earnings season has shown promise, with year-over-year growth reaching 16.4%, exceeding the 11.8% expected at the quarter’s start. Analysts project 13% earnings growth for 2025, though these optimistic forecasts may influence market valuations.
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