What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) fell 10.7% in the afternoon session after Wall Street sentiment toward the company turned more bearish, with several analysts cutting their forecasts and price targets. UBS analyst Joseph Spak issued the most bearish outlook, slashing his price target to $19, implying a potential 30% downside. Spak warned that while lower 2025 earnings expectations were becoming consensus, the broader earnings trajectory for Tesla still appeared overly optimistic and remained vulnerable to further downward revisions after Q1 2025 earnings are released. Similarly, Goldman Sachs lowered its price target from $275 to $260, reflecting growing near-term risks. The firm pointed to weakening auto demand, softer consumer sentiment, rising tariff-related costs, particularly within Tesla's Energy division, and increasing uncertainty around U.S. EV policy. Despite these headwinds, Goldman highlighted that the long-term potential from Tesla's AI-driven initiatives could serve as a meaningful offset, providing an avenue for future growth beyond its traditional automotive business. Separately, stocks gave back some of the gains from the previous day as the White House clarified the tariffs on imports from China would add up to 145%, while the baseline 10% tariffs remained in place for all countries. This reminded investors that the global trade environment remained volatile, limiting the potential for sustained market gains. Also President Trump said he was willing to accept pain in the short term, and was aware his policies could cause a recession, but he remained more mindful of a more severe case of economic depression (higher unemployment and prolonged downturn). For investors, this suggested that the administration could prioritize long-term structural shifts over near-term economic stability, further increasing policy-driven risk in the markets.
The shares closed the day at $252.39, down 7.2% from previous close.
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What The Market Is Telling Us
Tesla’s shares are extremely volatile and have had 128 moves greater than 2.5% over the last year. But moves this big are rare even for Tesla and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 1 day ago when the stock gained 6.8% on the news that markets rallied sharply on news that President Trump announced a 90-day tariff pause. Reciprocal tariffs were also dropped to 10% for most countries, sparking renewed optimism amid ongoing trade talks. The major stock indices rose as investors, growing impatient of seemingly irrational tariff actions, welcomed the pause as a sign of a more measured path forward. However, Trump was quick to note that China was not part of the pause. Instead, he prepared to raise tariffs on Chinese goods to 125% after China announced retaliatory tariffs on US imports. This tough stance on China stood in sharp contrast to the softer tone toward others. In a week marked by growing uncertainty, this news eased some of the pressure. The questions remain whether we are out of the woods and can sustain the rally or not.
Tesla is down 33.1% since the beginning of the year, and at $253.82 per share, it is trading 47.1% below its 52-week high of $479.86 from December 2024. Investors who bought $1,000 worth of Tesla’s shares 5 years ago would now be looking at an investment worth $5,849.
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