TLDR
Contents
- Tesla stock recovered most losses from the Musk-Trump feud, gaining 10% last week to close around $325
- JPMorgan data shows Tesla’s earnings estimates have plunged 77% for 2025 despite stock gains since 2022
- Tesla’s forward P/E ratio stands at 166 times compared to S&P 500’s 22 times
- EV subsidies represent about 52% of Tesla’s current profits, facing potential removal under Trump
- Robotaxi launch scheduled for June 22 after delays, with autonomous driving promises dating back years
Tesla shares bounced back last week as tensions cooled between Elon Musk and President Trump. The stock gained 10% to close Friday at around $325.
This recovery comes after a sharp selloff when Musk and Trump engaged in public sparring. Tesla shares dropped 8% in June while the S&P 500 gained 2%.
The feud highlighted concerns about Musk’s influence with the Trump administration. Early assumptions about Musk being “first buddy” fueled bullish predictions for Tesla.
Those predictions included millions of driverless cars and extended EV tax credits. Such outcomes now appear less likely given the strained relationship.
Valuation Concerns Mount
JPMorgan analyst Ryan Brinkman points to a troubling disconnect in Tesla’s valuation. The stock is up 12% since October 2022, but consensus earnings estimates have collapsed.
Estimates for 2025, 2026, and 2027 have dropped 77%, 70%, and 71% respectively. This creates a stark mismatch between price and fundamentals.
Tesla trades at 166 times forward earnings compared to 22 times for the S&P 500. The premium appears difficult to justify given weaker business trends.
EV subsidies currently represent about 52% of Tesla’s profits according to Brinkman. Trump’s planned removal of the EV tax credit could eliminate these profits entirely.
The analyst expects financial estimates to drop further as subsidy removal impacts become clearer. No medium-term uplift to sales or earnings has materialized from Musk’s Trump connection.
Technical Recovery Shows Promise
From a technical standpoint, Tesla bulls have defended key moving averages. The stock found support at both 50-day and 200-day moving averages.
The relative strength index has reclaimed its neutral threshold. This signals recovering price momentum after the recent decline.
Trading volume initially spiked during the breakdown but has since eased. This indicates moderating investor interest in the selloff.
Key support levels sit around $265 and $215 if selling resumes. Resistance appears near $365 and $430 for any continued recovery.
Robotaxi Launch Approaches
Tesla’s robotaxi demonstration is now scheduled for June 22 after delays. Musk originally promised the debut for June 12.
The CEO also claims a Tesla robotaxi will drive from Austin to Los Angeles. Such promises echo similar claims dating back to 2017 that never materialized.
Critics question Tesla’s camera-based approach versus LIDAR technology used by competitors. Weather conditions pose particular challenges for camera systems.
Waymo already operates 250,000 weekly robotaxi trips and continues growing rapidly. Tesla faces an uphill battle to catch up in autonomous driving.
Business Fundamentals Deteriorate
Tesla’s core EV business shows continued weakness across key metrics. Total deliveries fell 13% year-over-year to 337,000 last quarter.
Automotive sales dropped 20% while operating income fell 66% year-over-year. The company posted $7 billion in operating income over 12 months, down 50% from peaks.
Demand trends across China, Europe, and the US point to further declines. Used Tesla prices are falling while average used car prices rise.
The Cybertruck launch has disappointed and is reportedly losing money. Optimus robots remain years away from meaningful deployment.
Tesla shares have risen more than 50% from their early-April low as Musk stepped back from government roles. The stock remains down about 20% year-to-date on EU sales concerns and tariff uncertainty.
