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Tesla Shares Decline: Investors Shift Focus Amidst Political Ties
Despite Elon Musk’s close relationship with former President Trump, Tesla investors are increasingly returning their attention to the fundamentals of the company. This shift comes as Tesla’s stock has notably declined, falling 28% to $349.18 since reaching a high of $485.18 on December 18, 2024, shortly after Trump’s electoral victory. This downturn positions Tesla as the poorest performer among the so-called “Magnificent Seven” tech stocks, which also include Meta, Amazon, Microsoft, Nvidia, Google, and Apple.
The initial optimism surrounding Musk’s alignment with Trump suggested potential benefits for Tesla, particularly in the area of regulatory approvals for autonomous driving technology. However, the stock’s recent performance reflects a stark reversal of sentiment. As of now, Tesla’s shares have dipped below the crucial 50-day moving average, with the next significant support level identified at $334, corresponding to the 100-day moving average. Analysts caution that breaching this level could lead to a further decline towards the 200-day moving average, which is around $286.
In fact, Tesla’s stocks are under pressure due to a myriad of challenges. Sales figures from vital overseas markets indicate weakness. Data released by the China Passenger Car Association shows that Tesla’s vehicle sales in China plummeted by 33% in January from December, resulting in just 63,238 units sold. Similarly, the Electric Vehicle Council in Australia reported a 33% year-on-year decline in Tesla’s overall sales for January.
Moreover, the recent enactment of new tariffs poses additional hurdles. Trump’s administration has introduced a 25% tariff on steel and aluminum, which are critical materials for Tesla’s manufacturing processes. This price increase could exacerbate the existing cost structure for Tesla, especially in light of a 2023 study stating that a significant portion of the materials required for Tesla’s batteries is sourced from China, heightening the risks associated with ongoing trade tensions.
Tesla acknowledged these risks in its latest 10-K filing, highlighting that shifts in government policies, economic incentives, and tariff adjustments could directly influence their production capabilities and sales performance.
The company’s fourth-quarter results raised further concerns as they fell short of analysts’ expectations for earnings per share. A decrease of 8% in automotive sales compared to the previous year was reported, largely attributed to price reductions implemented across its vehicle lineup. Canaccord Genuity’s managing director remarked on recent earnings reports, noting that expectations for full self-driving capabilities in Europe and China would likely not materialize within the first quarter of 2025.
The broader sentiment among analysts has shifted, with many revising their earnings per share forecasts for Tesla for the coming years following disappointing results. Deutsche Bank highlighted the looming threat of stagnation in demand as consumers wrestle with EV fatigue and intensifying competition in the market.
As Tesla navigates these various challenges, the interplay between the company’s performance and external political factors remains crucial. Investors are left with significant uncertainty as they seek to gauge the future trajectory of both Tesla’s stock and its operational success.
Source
finance.yahoo.com