After finishing 2024 with a meteoric rise in its share price, Tesla (TSLA +0.42%) has been sliding since the start of the new year. The company reported earnings on Jan. 29, and the stock has declined by as much as 15% since. So far, in 2025, the stock has generated a negative return of 12% (as of market close on Feb. 14).
While it is true that sales in Tesla's core electric vehicle (EV) segment are decelerating, I think there is a more subtle reason for the sell-off. Below, I'm going to explore what I see as the root of the shares' decline and make the case for why now is a good opportunity to buy the dip.
Is Elon getting too comfy in Washington?
The chart below illustrates the fluctuations in Tesla's share price from Oct. 1 through Feb. 14. Notice anything?
Starting in early November, Tesla stock went on an epically bullish ride that propelled it to new all-time highs just as 2024 came to a close. One of the tailwinds that fueled the stock during the final weeks of 2024 was Donald Trump's win in the presidential election. Elon Musk was a big supporter of then-candidate Trump, and many investors simply assumed that his relationship with the president would bode well for Tesla's future -- especially as it relates to any regulatory hurdles for the company's ambitions with self-driving vehicles.
Following his inauguration, President Trump created a group called the Department of Government Efficiency (DOGE, for short) to identify excess spending in the federal budget. And he tapped Musk to lead this effort.
Over the last month, Musk has spent a lot of time at the White House working on the DOGE effort, leading some investors to question if he's losing focus on what should be his main priority, Tesla. In my opinion, the sell-off in Tesla stock has less to do with the company's uninspiring fourth-quarter earnings report and more to do with the CEO's time in Washington.
Why this sell-off is overblown
On the surface, I can understand if investors are wary that Musk is allocating too much of his time to DOGE as opposed to dedicating every moment to Tesla. However, the argument that he may be distracted is flawed for a couple of reasons.
First, he is a serial entrepreneur who has been at the center of a number of successful businesses. Beyond Tesla, he is the CEO of SpaceX and founded a number of billion-dollar start-ups including Neuralink, which is developing chips that are implantable in human brains; The Boring Company, a tunnel builder; and xAI, an artificial intelligence specialist. He also owns social media platform X (formerly Twitter) and is its executive chairman.
NASDAQ: TSLA
Key Data Points
So Musk is a busy person in the first place, and DOGE doesn't really change that. For years, he has been involved with a number of sophisticated businesses spanning space exploration, logistics, and AI -- all while running the show at Tesla.
My other issue with the view that his time in Washington may be a distraction is that investors seemed to love his relationship with Trump just two months ago (as depicted in the chart above). Selling Tesla stock now because you're nervous that Musk may be getting too cozy in Washington seems contradictory in some ways.
Image source: Getty Images.
Is now a good time to buy Tesla stock?
Tesla is a stock that has always traded out of the bounds of traditional valuation metrics. The company has accelerated sales and profits in recent years, and the stock trades in an entirely different universe when compared to other automakers.
TSLA PS ratio, data by YCharts; PS = price to sales.
I've made the case in the past that Tesla is really a technology company that happens to sell cars. It's investing heavily in an autonomous vehicle fleet as well as dedicating a good portion of its artificial intelligence (AI) budget to Optimus humanoid robots, so Musk has a vision for Tesla well beyond EVs.
For these reasons, I've always thought that it's a little dicey driving your investment decision in Tesla based purely on valuation metrics. To me, the ongoing sell-off is disconnected from the fundamentals of the business.
The core operations of the company do need a new jump-start, but I think this is quite possible over the next several years, especially given his relationship with President Trump. For now, I wouldn't worry too much about Musk's focus on DOGE. If you're an investor with a long-term horizon, I think now is a good opportunity to take advantage of Tesla's low stock price.
