Tesla sell-off on Musk-Trump feud is overdone, says Fundstrat's Tom Lee

Fundstrat's Tom Lee views Tesla's 14% plunge following Elon Musk's public spat with President Trump as an overreaction and a buying opportunity, despite the company shedding $152 billion in value. Lee believes Musk's actions may improve Tesla's image with non-MAGA supporters, and considers Trump's threat to cut government contracts as unlikely given the critical services Musk's companies provide. Despite a 29% drop in Tesla shares this year, the average analyst expects a slight increase in the year ahead, and the stable VIX suggests broader market concerns are limited.

Analysis

Tesla's stock experienced a significant 14% decline on Thursday, equating to a record $152 billion single-day market capitalization loss, triggered by a public dispute between CEO Elon Musk and President Donald Trump, during which Trump threatened to cut government contracts for Musk's companies. Despite this sharp fall, Fundstrat's head of research, Tom Lee, characterized the plunge as "unnecessarily severe" and identified it as a "buying opportunity." Lee suggests that Musk's altered stance might broaden his appeal beyond the "non-MAGA universe," potentially improving Tesla's brand perception, and views Trump's threats regarding government contracts as "hollow" due to the critical nature of services provided by Musk's enterprises. Although Tesla shares showed a more than 4% recovery in Friday's premarket trading, they have declined over 29% in 2025. The broader market, reflected by the stable CBOE Volatility Index (VIX), appears largely unperturbed by these company-specific developments. Current LSEG analyst consensus indicates a buy rating for Tesla, but projects a modest share price increase of just over 1.5% in the coming year.

Key Decisions for Investors

• Investors might consider the recent sharp decline in Tesla's stock as a potential entry point, particularly if they align with Fundstrat's view that the political fallout is an overreaction and Musk's actions could enhance brand appeal.
• It is crucial to monitor ongoing political rhetoric and any actual or perceived threats to government contracts for Musk's companies, as this remains a significant risk factor despite some analysts dismissing such threats.
• Investors should weigh the contrarian buying opportunity presented by the stock's pullback against its substantial year-to-date underperformance of over 29% and the modest 1.5% upside forecasted by consensus analysts over the next year.