Tesla’s (TSLA) revenue within the first quarter of 2025 plunged a shocking 71 p.c, as gross sales dropped 9 p.c from the year-ago interval. Regardless of the gross sales decline — and the opportunity of extra to return — the electrical car maker’s inventory truly rose after the report, as Tesla CEO Elon Musk introduced that he was paring again his function on the Division of Authorities Effectivity (DOGE).
Tesla inventory was not too long ago down greater than 50 p.c from its all-time excessive, which was reached in December 2024, a startling plunge for one of many Magnificent 7 shares. So the shares’ latest bounce on “much less unhealthy” information might not be so stunning, however with Musk saying that he expects to proceed his function at DOGE with fewer hours, the carnage could also be removed from over at Tesla.
Tesla’s first-quarter gross sales and Musk’s key-man threat to Tesla
For the primary quarter, Tesla reported gross sales of $19.34 billion, in comparison with $21.3 billion within the first quarter of 2024. However the extra fascinating determine is gross sales from automobiles, which plunged 20 p.c within the interval. Tesla reported first-quarter deliveries that missed analysts’ estimates by 14 p.c, making it the bottom quarter for deliveries for the reason that second quarter of 2022.
The unhealthy information could be getting began, as shoppers throughout the globe react to Musk’s political actions as a part of DOGE and his ties to U.S. President Donald Trump. In March, automobile registrations plunged by high-double-digit percentages in key European markets resembling France, Norway and Denmark. And it wasn’t solely Europe. In China, Tesla’s second-most-important market, shipments fell 49 p.c in February. Within the U.S., Tesla can also be dealing with client backlash, together with boycotts, vandalism of Tesla autos and outright destruction of automobiles, in accordance with varied media experiences.
However whereas Tesla stumbles, electrical car gross sales proceed to rise in Europe. The European Car Producers’ Affiliation mentioned that EV registrations in its markets truly elevated by 31.4 p.c in January and February versus a yr in the past. So it’s not shoppers turning away from electrical autos; they’re turning away particularly from Tesla.
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Musk’s lowered deal with Tesla has led to slumping gross sales, say some buyers, and even famous Tesla bull and Wedbush analyst Dan Ives referred to as on Musk to “change course.” Musk appears to have heeded the calls, saying that probably beginning in Might he would lower his time at DOGE to only one or two days per week for the remainder of Trump’s time period in workplace.
Whereas Musk says that he’ll spend extra time at Tesla, the injury to Tesla’s model might already be carried out. And importantly, Musk’s announcement nonetheless doesn’t get rid of the important thing explanation for the Tesla backlash — Musk’s ongoing affiliation with DOGE (and extra typically, Trump). So Tesla is more likely to proceed to undergo reputational hurt because of the key-man dangers offered by Musk.
Tesla buyers ought to stay cautious
Whereas the huge decline in Tesla inventory helps scale back the danger of patrons in the present day, buyers ought to think about the truth that Tesla nonetheless seems to be vastly overpriced by typical valuation measures. So Musk continues to level to the long run as a cause for buyers to purchase or proceed to carry their inventory. Tesla mentioned that it’s anticipating to provide robotaxis in quantity in 2026, although Musk has lengthy been cheerleading robotaxis and different guarantees, resembling humanoid robots, to hype the inventory.
In the meantime, the CEO’s brother, Kimbal Musk, has offered practically $43 million in inventory from November 2024 to February 2025. And he’s solely one in every of a number of insiders who’ve been promoting Tesla shares.
So with what seems to be an arguably overvalued inventory and Musk’s continued involvement with Trump, buyers should be particularly cautious with Tesla inventory. The carnage may get so much worse. Musk presents big key-man threat to the corporate, together with the huge variety of shares he’s pledged.
Editorial Disclaimer: All buyers are suggested to conduct their very own impartial analysis into funding methods earlier than investing determination. As well as, buyers are suggested that previous funding product efficiency is not any assure of future value appreciation.
