Tesla Stock Plummets 7% as Musk’s Political Party Launch Sparks Trump Feud
Shares of Tesla Inc. (NASDAQ: TSLA) fell about 7% on Monday to $293.94. This was the stock's worst day since early June, when CEO Elon Musk
Quick overview
- Tesla's stock fell about 7% to $293.94, marking its worst day since June due to CEO Elon Musk's announcement of a new political party.
- The company's market valuation dropped by over $68 billion following Musk's political plans, which drew criticism from former President Trump.
- Analysts are divided on Tesla's future, with some predicting significant growth while others express concern over Musk's political distractions and declining vehicle deliveries.
- Key support levels to watch include $285 and $265, with a potential rebound requiring a break above $318.
Shares of Tesla Inc. (NASDAQ: TSLA) fell about 7% on Monday to $293.94. This was the stock’s worst day since early June, when CEO Elon Musk announced he was starting a new political party, which led to a steep selloff and renewed tensions with President Donald Trump.
After Musk announced on Saturday that he planned to start the “America Party” to target key congressional districts and be the deciding vote on controversial legislation, the electric vehicle maker’s market valuation dropped by more than $68 billion. Trump quickly criticized the revelation, calling Musk’s political goals “ridiculous” and saying that the Tesla CEO had “completely lost it.”
TSLA Stock’s Technical Analysis Points to Further Weakness
From a technical point of view, Tesla’s most recent drop has broken through important support levels and confirmed bearish momentum patterns that have been forming over the past few weeks. The stock is now below its 200-day exponential moving average and is testing the bottom end of a two-month consolidation zone that starts at $290.
The relative strength indicator (RSI) hit its lowest level since early June, which confirms that prices are losing momentum. The stock has broken down from a bearish flag pattern that developed earlier this month, which is bad news for bulls. The selling sped up on Monday when the pattern’s lower trendline was retested late last week.
Three important support levels are presently being watched by market specialists. The first one is approximately $285, which is close to the beginning of the flag pattern and a few peaks that went against the trend earlier this year. If the price drops below this level, it will go after the $265 area, which is where peaks formed in October of last year. The most important downside objective is $225, which is the low point for trading in March and April and the last small peak in August.
Analyst Sentiment Remains Divided
There is a divide among Wall Street analysts on Tesla’s future. The stock has a “Hold” rating based on 14 Buy, 12 Hold, and 9 Sell recommendations. The average price prediction of $293.09 means that there isn’t much room for growth over the next 12 months, but some analysts are still very positive.
Wedbush Securities, one of Tesla’s biggest fans, still thinks the stock will reach $500. They also think that if the business follows through on its autonomy strategy, the market cap may reach $2 trillion by the end of 2026. But analyst Dan Ives was unhappy with Musk’s renewed political focus. He said, “Diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors want him to take.”
Fundamental Challenges Mount
Tesla’s main company is having a hard time right now, and the political turmoil isn’t helping. The firm said that second-quarter vehicle deliveries were down 14% from the same time last year, which was below what analysts had expected. This was the company’s first yearly sales drop since going public. Tesla is facing more and more competition from Chinese company BYD, which is about to become the world’s biggest electric vehicle maker by yearly sales.
Tesla’s trailing 12-month normalized price-to-earnings ratio of 141 is much higher than the median for the automotive sector, which is 16. This, together with the fact that diluted earnings per share fell by 56% year over year, has investors worried. The company’s high value is still mostly based on its potential for self-driving cars and Musk’s leadership brand, but investors are getting tired of political diversions.
Near-term Outlook Remains Uncertain
There are a number of problems that Tesla’s stock will have to deal with in the future. On July 23, the company will disclose its earnings. Analysts predict profits per share to be $0.41, which is a 21% drop from the previous year. The company expects to make $22.66 billion in sales, which is 11% less than last year.
The current fight between Trump and Musk might make things worse, especially if the government cuts EV subsidies that have helped Tesla grow. Neil Wilson of Saxo Markets said that investors are anxious about both the possibility of subsidy reduction and the fact that Musk seems “distracted” from the problems Tesla is having with its business.
Some technical analysts, on the other hand, see a chance for a longer-term rebound. Fibonacci extensions say that the stock might eventually hit $520, which would be a 70% rise from where it is now. However, this would only happen if the price broke through the $360 resistance level.
Key Levels to Monitor
In the next few weeks, traders and investors should pay special attention to a few price levels. If the price breaks below $285 or $265, it would validate the bearish thesis and go for the $225 support zone. On the other hand, any attempt to recover would have to get over resistance at $318, which is close to the 50-day moving average and the high from last week’s flag retest.
A strong rise above $365 would suggest a possible trend change, which would go against the bearish story that has been going on with Tesla’s price action lately and line up with May’s swing high.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save