Tesla's Shares are Diving. Here's What Sets This Selling Spree Apart
After soaring to new heights at the end of 2024, Tesla's stock (TSLA -1.74%) has taken a plunge since the start of 2025. Despite the company posting lackluster fourth-quarter earnings, I believe there's more to this slide than meets the eye. Let's delve into the root causes and discuss why now might be the perfect time to jump on the bandwagon and buy low.
Elon's Epic Washington Sojourn
Take a gander at this trend line, running from October 2024 to February 2025. Notice anything peculiar?
The graph reveals a rollercoaster ride for Tesla stock, with a dramatic surge toward the end of 2024 that brought the company to new heights. One of the major factors driving this growth was the victory of Donald Trump in the presidential election. Elon Musk, a known supporter of then-candidate Trump, was thought to have a cozy relationship with the president that would be a breeze for Tesla, particularly regarding any regulatory hurdles related to self-driving cars.
Following the inauguration, President Trump established a task force called the Department of Government Efficiency (DOGE, for short) to root out unnecessary federal spending. Musk was named the leader of this group, which shifted his focus away from Tesla for a spell. Some investors have interpreted this as a sign of waning commitment to the company. In my opinion, the stock dip is less about Tesla's earnings report and more about Elon's new gig in Washington.
The Overblown Fear Factor
While it's understandable for some investors to fear that Musk is spreading himself too thin, the argument that he's neglecting Tesla is flawed. Here's why:
First off, Elon is an accomplished serial entrepreneur with his hands in a variety of successful ventures, including SpaceX, Neuralink, The Boring Company, and xAI. With a long history of balancing demanding projects while spearheading Tesla, pinning the recent stock decline primarily on a change in focus seems short-sighted.
Moreover, the stock's drop following Trump's election victory seems contradictory. Investors were raving about the relationship between Tesla and the White House back then, making the sudden sell-off in 2025 look a bit irrational.
Is It Time to Buy Tesla Stock?
Tesla is a stock that defies conventional valuation metrics. A tech giant disguised as a car manufacturer, the company has seen a surge in sales and profits in recent years and operates on a whole different level compared to other car manufacturers when it comes to stock valuations.
I've argued that Tesla is, at its core, a technology company that just so happens to make automobiles. The company is pouring resources into developing an autonomous vehicle fleet and developing Optimus humanoid robots – a vision that extends well beyond electric vehicles.
Given Tesla's unique nature and disruptive capabilities, it's not wise to solely rely on traditional valuation metrics to evaluate the stock. The ongoing sell-off appears to be unrelated to the firm's financial fundamentals.
While the core operation of Tesla could use a boost, there's plenty of space for improvement, especially with potential regulatory relief on the horizon and the support of a president with a favorable view of the company. For investors with a long-term horizon, now might be the optimum moment to take advantage of Tesla's low valuation and ride the rally.
- Given the fluctuations in Tesla's stock price, some investors might be hesitant to invest, but the plunge since the start of 2025 might present an opportunity to buy Tesla (TSLA) at a lower cost.
- Elon Musk's involvement in the Department of Government Efficiency under President Trump's administration has led some to question his commitment to Tesla, but his proven track record as a serial entrepreneur suggests that he can manage multiple ventures effectively.
- Despite the company posting lackluster fourth-quarter earnings, Tesla's financial fundamentals remain strong due to its status as a technology company with disruptive capabilities, such as its autonomous vehicle fleet and Optimus humanoid robots.
- The ongoing sell-off of Tesla stock might be unrelated to the firm's financial fundamentals, and the potential for regulatory relief and support from a president with a favorable view of the company make it an appealing option for long-term investors searching for a low-valuation buy.
