Tesla Stock Takes a Nosedive as 2025 Begins
As 2024 came to a close, Tesla (TSLA), ranked #3 (Hold) by Zacks, was riding high on expectations around a potential Donald Trump presidential victory, plans for autonomous vehicles, and investor enthusiasm. The year marked a significant milestone for the electric vehicle leader, especially after shareholders supported CEO Elon Musk’s substantial pay package, which faced legal challenges in Delaware.
However, the tides have turned sharply in 2025. TSLA shares have eroded all gains made following the U.S. election, plummeting over 40% year-to-date.
Image Source: Kobeissiletter, TradingView
Investor sentiments reveal anxiety regarding Elon Musk’s political involvement, sluggish sales in Europe and China, and broader market conditions. Here are five key insights into Tesla’s current situation:
Ron Baron: Continued Optimism for TSLA
Billionaire investor Ron Baron remains one of Tesla’s most vocal supporters. Having built a close relationship with Musk, Baron invested approximately $400 million in TSLA between 2014 and 2016, growing his stake to over $5 billion. In a recent CNBC interview, he accurately predicted the stock’s intermediate bottom.
In his latest remarks, Baron highlighted the potential of Tesla’s upcoming Robotaxi rollout. While Alphabet’s Waymo has made early strides in this arena, he believes that Tesla’s Robotaxis will be more cost-efficient, estimating production costs at roughly $35,000 compared to Waymo’s $150,000 to $200,000. Baron projects that the Robotaxis could generate profits between $30,000 to $50,000 over time, compared to the current profit margin of around $7,000 from Tesla vehicles.
Political Backlash Sparks Support for Tesla
Tesla has recently faced increasing reports of vandalism against its vehicles, correlating with Musk’s engagement in politics, particularly as part of the Trump administration. In response to a dramatic drop in Musk’s net worth, President Trump pledged his support, stating, “I’m going to buy a brand new Tesla tomorrow morning as a show of confidence and support for Elon Musk, a truly great American.” Following his remarks, several right-leaning influencers shared images of new Tesla purchases on social media.
Morgan Stanley Issues Strong Bullish Forecast
On Tuesday, an analyst from Morgan Stanley (MS) made a bullish statement on Tesla shares, noting: “Tesla shares have fallen 50% from the December 17th highs due to poor sales data, negative brand sentiment, and market de-grossing. We see the pullback as a buying opportunity for an embodied AI compounder.” The firm’s bullish scenario predicts TSLA reaching $800 per share.
Assessing the Broader Market Context
While many attribute the decline in Tesla’s share price primarily to Musk, data indicates that the stock’s struggles are linked to overall market trends. Approximately 75% of stocks mirror market movements, and TSLA has not been insulated from this broader decline.
Image Source: Bloomberg
Currently, TSLA is facing a critical juncture; the stock is experiencing its eighth consecutive week of decline, and the relative strength index (RSI) is signaling one of the most oversold conditions in Tesla’s trading history.
Conclusion
Tesla’s swift decline at the start of 2025 underscores the company’s volatility, the impact of political events, and growing skepticism. Despite challenges related to Musk’s varied activities and decreasing sales, industry figures like Morgan Stanley and Ron Baron view the current crisis as a potential opportunity.
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This article originally published on Zacks Investment Research (zacks.com).
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