Tesla (TSLA 0.09%) CEO Elon Musk may have a seat at the table in the Trump administration, but his company's stock hasn't been immune to the market carnage initiated by the administration's trade policies.
Tesla shares are down more than 40% year to date, including a double-digit drop since President Trump announced his global tariff plans on April 2. That's led one analyst to sharply cut his price target on the electric vehicle (EV) leader's stock.
Wedbush analyst Dan Ives slashed his price target on Tesla stock from $550 to $315 per share. Should investors sell as analysts like Ives grow more bearish on Tesla stock, or should they jump in given the upside that still exists in that new price target?
NASDAQ: TSLA
Key Data Points
Tesla and tariffs
Ives' strongly bullish outlook on Tesla has taken a hit in this market environment. The recent slide in Tesla shares may seem like an overreaction to some, considering the EV maker doesn't import any vehicles for sale in the U.S. But Ives has concerns beyond just the tariffs: "Musk-created brand crisis + Trump tariffs = perfect storm for Tesla," as reported by Barron's.
Tesla investors should have concerns. The stock is richly valued based on its current business fundamentals. Following the recent sell-off, its price-to-earnings (P/E) ratio still sits close to 90 based on this year's estimated earnings. That's one reason fears of an economic slowdown hit the stock.
Another is that Tesla is in a vulnerable position should tensions further escalate with China. Its largest and reportedly most profitable factory is in Shanghai. The Chinese government could target Tesla as leverage in a trade war with the U.S. China accounted for over 20% of Tesla's revenue last year.
Ives estimates that Musk's political activities have materially impacted the brand, contributing to an estimated loss of about 10% of Tesla's future customer base. However, there is also a future beyond EVs for Tesla. A shareholder's level of confidence in that future is likely to be the key factor in their decision to hold or sell in the face of this volatility.
