Elon Musk at Tesla factory in CA. Photo | courtesy.
Tesla stock took a significant hit on Monday, plummeting over 13 per cent to close at Sh29, 475 ($227.61), marking a 50 per cent decline from its peak in December.
The downturn was primarily driven by UBS analyst Joseph Spak’s decision to slash his first-quarter delivery forecast from 437,000 to 367,000 vehicles. He also adjusted his 2025 projection to 1.7 million vehicles, notably below Wall Street’s consensus of 2 million. Spak attributed these revisions to weak early-year sales data and reduced his price target for Tesla from Sh33,540 ($259) to Sh29,137 ($225), maintaining a “Sell” rating.
Investors are growing increasingly concerned about CEO Elon Musk’s involvement in President Trump’s Department of Government Efficiency (DOGE). This role has sparked protests and added uncertainty for Tesla’s stakeholders. Notably, searches for “DOGE” have outpaced those for “Tesla,” reflecting heightened public attention on Musk’s political engagements.
The broader market sentiment isn’t helping either. President Trump’s recent comments about a potential recession have rattled investors, leading to significant declines across major indices. The S&P 500 and Dow Jones Industrial Average dropped 2.7 per cent and 1.8 per cent, respectively, on the same day.
Despite these challenges, some analysts remain optimistic about Tesla’s future. Dan Ives of Wedbush maintains a “Buy” rating with a Sh71,225 ($550) price target, citing the company’s potential in self-driving taxi services and AI-driven robotics.
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However, Tesla’s recent performance has raised eyebrows among institutional investors. The American Federation of Teachers (AFT), representing 1.8 million members, has expressed concerns over Tesla stock value and its impact on pension funds. AFT President Randi Weingarten emphasized the need for asset managers to reassess their investments in Tesla, given the potential risks to teachers’ pensions.
The company’s challenges extend beyond stock performance. Tesla has reported a 23 per cent profit decline and a 71 per cent revenue drop year-over-year, indicating eroding pricing power and increased market competition. Sales declines in key markets like China and Germany further exacerbate investor concerns.
Tesla faces a confluence of challenges including reduced sales projections, leadership distractions and economic uncertainties.
