Tesla Motors has a budding brand problem. The question for investors is whether CEO Elon Musk will realize it in time.
Tesla stock closed up 5.3% at $248.71, while the S&P 500 the Dow Jones Industrial Average gained 0.1%.
Friday’s bump, however, wasn’t enough to keep shares from falling for their ninth consecutive week—a record for Tesla stock. Shares dropped $1.27 for this week, equaling a decline of less than 1%.
Likely not helping the stock Friday was a target price cut from Morgan Stanley analyst Adam Jonas.
“Sharply lower year-to-date delivery volume drives a mark-to-market of near-term estimates,” wrote Jonas in a report Thursday evening. His new call for first-quarter deliveries is 351,000, down from 415,000. His new stock price target is $410 a share, down from $430.
He still rates Tesla stock a Buy. Lower first-quarter sales aren’t “particularly narrative-changing” for the analyst, who remains optimistic about Tesla’s opportunity to leverage artificial-intelligence expertise to create robots and self-driving cars.
Jonas’ sanguine view contrasts sharply with investors’ current mood. Weak sales results and falling Wall Street estimates have stoked fears that Musk’s political activities have alienated Tesla’s core buyers, who are politically left-leaning people looking to go green.
There are reasons investors are nervous. Interest in the cars seems to be dwindling. Searches for used Tesla cars were down 17% month over month and 7% year over year in February, according to Cars.com. Meanwhile, searches for other EVs have risen closer to 20% year over year. Edmunds data also showed that Tesla owners traded in a record number of cars in March, representing 1.4% of trades at dealerships, up from 0.4% a year ago. New model “shopping interest” in February dropped to its lowest-level since October 2022, Edmunds said.
It isn’t the first time Tesla has faced controversy. Tesla analysts and investors have “seen everything,” says Wedbush analyst Dan Ives, citing issues around Musk’s time, tweeting, Tesla’s financing, Musk’s tweeting about Tesla financing, Musk’s X purchase, Tesla’s profitability, product launches, and timing of product launches. “There have been haters…but [the] brand was never at risk.”
“Now it’s reached a tipping point. I think Musk has underestimated the way the game is played inside the beltway,” added Ives.
He rates Tesla shares Buy and has a $550 price target on the stock. Most of that value, like Jonas said, comes from AI applications and not the core car business. Still, Ives wants to see Musk spend more time at Tesla and less time at Mar-a-Lago.
To be sure, the severity of the brand issue could be overstated. TD Cowen analyst Itay Michaeli wrote earlier this week that Tesla could theoretically gain a bigger pool of buyers from Musk’s red tilt.
“Recent concerns over a growing political divide around Tesla’s brand are legitimate,” wrote the analyst. “But what such concerns seemingly overlook is that under scenarios whereby Tesla were to lose share in Blue counties but gain in Red, Tesla could actually net meaningful sales gains over time.”
He rates Tesla stock Buy and has a $388 price target on the shares.
That could be true. Eventually, however, Tesla would be better off selling cars to all Americans. “The last thing you want, whether you are red, blue, [or] purple is for Tesla to become a political symbol,” said Ives.
The question is whether Musk will begin to feel that way. There is precedent for Musk’s pivoting. After buying Twitter, which is now X, he committed to stop selling Tesla stock and hired CEO Linda Yaccarino, both of which helped soothe investors’ frayed nerves.
Musk held an “all-hands” meeting for Tesla employees on X, emphasizing the importance of robots and robo-taxis. He added that he’s focused on keeping the Model Y as the world’s best-selling vehicle—of any kind, gas or electric. According to Tesla, the Y claimed top spot in 2023 and 2024.
Robo-taxis and robots aren’t here yet, so there is still work for Musk to do. His engagement alone, however, should help calm frayed nerves.
He is also slated to visit the Pentagon on Friday, which will stock more fears of DOGE-related cuts and conflicts of interest. Musk’s SpaceX is a defense contractor.
President Donald Trump addressed the visit in a White House press conference on Friday, dismissing the notion that Musk would be looking at classified defense plans or projections. Musk was there to talk about budgetary savings.
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