Tesla Stock Falls Amid Musk Vs Trump Feud

Tesla (TSLA) shares fell 14% on Thursday, marking their worst day since March, amid escalating tensions between Elon Musk and President Trump. This decline coincides with weakening European sales, with May sales down 45% YoY in the U.K. and 36% in Germany, as competition from Chinese EV brands intensifies, and BYD has surpassed Tesla as the top-selling EV brand in Europe. Furthermore, fiscal year 2025 and 2026 EPS estimates have dropped 25% and 18% over the last 60 days, respectively, leading to a Zacks Rank #5 (Strong Sell) rating.

Analysis

Tesla (TSLA) shares experienced a significant downturn, falling 14% on Thursday, marking their most challenging trading day since March, primarily attributed to the escalating public dispute between CEO Elon Musk and President Trump. This political friction carries substantial risk, as Musk's criticism of the administration's budget reconciliation bill could jeopardize crucial EV tax credits for Tesla and potentially invite harsher regulatory scrutiny or loss of government contracts. The company's operational performance is also under pressure, evidenced by a sharp decline in European sales; May figures revealed a 45% year-over-year drop in the U.K. and a 36% decrease in Germany. This slump is occurring amidst intensifying competition from Chinese EV manufacturers, with BYD notably surpassing Tesla to become the top-selling EV brand in Europe. These challenges are reflected in deteriorating fundamentals, as fiscal year 2025 and 2026 earnings per share (EPS) estimates have been revised downwards by 25% and 18% respectively over the last 60 days. Technically, TSLA stock presents a bearish outlook, having fallen below its 50-day simple moving average of $292, which is also trading below its 200-day SMA of $310, a configuration typically indicative of a downtrend. The culmination of these factors has led to a Zacks Rank #5 (Strong Sell) rating, and the article notes that short-selling strategies against TSLA have recently yielded positive returns, further underscoring the negative sentiment. Concurrently, domestic competitors like General Motors (GM) and Ford (F) may find opportunities to increase their EV market share due to Tesla's current predicaments.

Key Decisions for Investors

• Investors should exercise extreme caution regarding Tesla stock due to the confluence of heightened political risk stemming from the Musk-Trump feud, declining European sales where BYD is now the market leader, sharply falling EPS estimates, and bearish technical indicators.
• Given the Zacks Rank #5 (Strong Sell) and the potential for adverse policy changes such as the elimination of EV tax credits or stricter regulations, a review of existing TSLA positions for risk mitigation, including potential reduction or hedging, is advisable.
• Monitor closely for any developments in the political situation, Tesla's European sales figures, competitive responses from Ford and General Motors, and any stabilization in earnings revisions before considering new long positions, as current conditions suggest a high probability of further downside.