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The public name-calling between Elon Musk and President Trump may be over (for now), but the debate around Tesla’s (TSLA) stock is only set to heat up as investors digest the upcoming robotaxi launch and likely another weak quarterly report in late July or early August.
As one would expect, the very public spat that erupted between Musk and Trump has sent shares of the EV maker on a wild ride.
Tesla shares are off by 8% (and a lot more at the height of the sparring session) in June versus a 2% gain for the S&P 500 (^GSPC) as investors fear Trump will take aim at Musk’s various lines of business. That’s even if the president has cooled his rhetoric on Musk — the president isn’t one to forget digs, ever.
Musk being out of Trump’s inner circle also runs counter to the bull thesis of Tesla’s stock following the November election. Remember, Musk being the “first buddy” was supposed to lead to millions of Tesla’s driverless cars on the roads and the extension of the Biden administration’s EV tax credit, among other pie-in-the-sky predictions that swirled.
Good luck with that now, Tesla bulls.
But the dustup between the two powerbrokers brings to light a major problem for Tesla’s stock as Musk tries to jump-start a sagging EV business by again sleeping inside a factory. There is a BIGLY disconnect between Tesla’s valuation and what’s happening underneath the surface.
For example, Tesla’s stock is up 12% since October 2022, but consensus EPS estimates for 2025, 2026, and 2027 have since plunged 77%, 70%, and 71%, respectively, according to new research from JPMorgan auto analyst Ryan Brinkman.
You can study Tesla’s EPS estimate trends for yourself on the Yahoo Finance platform.
The stock is valued at a significant premium to the broader market despite EV tax credits likely going away. Tesla’s forward price-to-earnings multiple stands at an eye-popping 166 times compared to 22 times for the S&P 500.
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No clue how one can reasonably justify that, given Tesla’s weaker fundamentals and as it’s heading into at least two years of heavy investment to support robot building and robotaxi operations.
The EV tax credit has been a driver of Tesla’s sales and profits. EV subsidies represent about 52% of Tesla’s current profits, Brinkman estimates. Trump’s “big, beautiful bill” that removes the EV tax credit could wipe out these profits for Tesla.
