Musk and Trump Clash Impacts Tesla Stock
The public feud between Elon Musk and President Donald Trump has significantly impacted Tesla's stock performance, leading to substantial market volatility and investor concern.
š Tesla's Stock Plunge
Tesla's shares experienced a dramatic 14% drop, erasing approximately $152 billion in market capitalization, Musk's public criticism of Trump's "One Big Beautiful Bill" tax legislation. This decline marked Tesla worst single-day performance since the COVID-19 pandemic.
The stock's downturn was further exacerbated by threats from Trump to revoke federal contracts and subsidies Tesla, including potential cuts to electric vehicle tax credits.
š Partial Recovery Amidst Uncertainty
Despite the initial plunge, Tesla's stock rebounded by over 5% the following day, closing at $295.14. This recovery was fueled by investor optimism over potential reconciliation between Musk and Trump, although the White House indicated that Trump was not interested in engaging with Musk at that time.
š Broader Market Implications
The Musk-Trump conflict has raised concerns about the influence of high-profile individuals on market stability. Former JPMorgan strategist Marko Kolanovic warned that the feud could trigger a broader market correction of 5% to 10%, particularly affecting momentum-driven stocks like Palantir and Super Micro, which are closely tied to Tesla's performance.
š Tesla's Valuation and Future Prospects
Analysts have expressed concerns about Tesla's high valuation metrics, with a forward P/E ratio of 118.9 and a price-to-sales ratio of 8.6, which may not be sustainable given the company's recent performance. Additionally, Tesla faces challenges such as declining sales in Europe, increased competition from Chinese automaker BYD, and reputational damage from nationwide protests linked to Musk's political activities.
š® Outlook
While Tesla's stock has shown some resilience, the ongoing political tensions and potential policy changes pose significant risks to the company's future performance.
