This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Tesla (NASDAQ: TSLA) stock is on the move again, and for the wrong reasons. The automaker's stock fell 7% on Monday after Wedbush analyst Dan Ives issued a grim report in response to CEO Elon Musk's plans to start a new political party.
Regardless of whether you support Musk's plans or not -- or if you cheered or booed when he was working as President Donald Trump's right-hand man to shrink the size of the federal government with the Department of Government Efficiency (DOGE) -- investors should be deeply concerned about Tesla's recent struggles. The stock price is down, deliveries are faltering, and the one-time darling of the electric vehicle movement is battling some significant headwinds.
If you're a Tesla stock owner, is this the time to sell? Or do you have faith that Musk can rally, and Tesla stock is just a bargain for long-term investors?
How did we get here?
The volatility in Tesla stock can be traced to the 2024 presidential campaign, when Musk put in $250 million of his own money to back Trump. He soon became a regular fixture at Trump's Mar-a-Lago estate and followed Trump on the campaign trail.
All that was extraordinary, considering the immense pressures on Musk's time: in addition to being CEO of Tesla, Musk heads the private aerospace company SpaceX; the social media platform X (formerly known as Twitter); The Boring Company, which is involved in tunnel construction projects like the Las Vegas Convention Center loop; xAI, which is developing generative AI;, and Neuralink, which is dedicated to the development of brain-computer interfaces.
Then, when Trump took office in 2025, Musk joined the administration as head of the newly created DOGE. Officially classified as a temporary government employee, high-level Musk associates joined numerous government agencies and began cutting staff, cancelling contracts, and restructuring agencies.
But for Tesla, it came at a cost. So-called "Tesla takedown" protests began in the spring and included hundreds of demonstrations at Tesla showrooms around the country. Tesla's stock price, which finished 2024 strong as investors bet that Musk's relationship with the White House would lead to favorable treatment, tumbled rapidly, and is now down 25% on a year-to-date basis.
In addition, many people stopped buying Teslas -- hammering the company's bottom line. Tesla deliveries are down sharply so far this year from where they were a year ago.
| Time Period | Model 3/Y Deliveries | Other Model Deliveries |
|---|---|---|
| Q1 2024 | 369,783 | 17,027 |
| Q2 2024 | 422,405 | 21,551 |
| Q3 2024 | 439,975 | 22,915 |
| Q4 2024 | 471,930 | 23,640 |
| Q1 2025 | 323,800 | 12,881 |
| Q2 2025 | 373,728 | 10,394 |
Data source: Tesla quarterly reports.
Tesla will release its second-quarter earnings report on July 23. But if it's anything like the Q1 report, investors should brace for the worst. In the first quarter, Tesla reported $19.33 billion in revenue, down from $21.3 billion in the first quarter of 2024. Profits fell to $3.15 billion from $3.69 billion in the previous year, and earnings per share tumbled from $0.41 cents to $0.12 cents.
What did Dan Ives say?
Musk split badly from Trump in recent days as the White House pushed Trump's "Big, Beautiful Bill." Musk says the newly signed law, which will add an estimated $3.5 trillion to the federal deficit, runs in opposition to DOGE's efforts to cut federal spending. He said the legislation will destroy millions of jobs and "gives handouts to industries of the past while severely damaging industries of the future" -- an obvious reference to the law's elimination of electric vehicle mandates that made EVs more affordable.
Musk pledged to begin a new political party, the America Party, as Congress prepared to approve it, although it's unclear if he's taken any concrete steps to register the party since the law went into effect July 4. But his statements were enough for Webush's Ives, who has been a longtime Tesla bull, to issue a scathing report of concern on Monday:
Very simply, Musk diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors/shareholders want him to take during this crucial period for the Tesla story. While the core Musk supporters will back Musk at every turn no matter what, there is [a] broader sense of exhaustion from many Tesla investors that Musk keeps heading down the political track.
In a follow-up note on Tuesday, Ives wrote that Musk's battle with Trump risks a $1 trillion opportunity in autonomous vehicles. He recommended three things to right the ship: that Tesla's board step in to limit the amount of time Musk spends on politics, set up a special oversight committee to review Musk's political activities, and give Musk a greater stake in Tesla as an incentive to focus on the company's profits.
What investors should do next
Clearly, Tesla is at an inflection point. For investors, what happens next is more about how you feel about the company's CEO than how you feel about its vehicles.
If you believe that Tesla is being hurt by Musk -- and to be honest, leaving $1 trillion in autonomous vehicle sales is a huge issue -- then this is probably a good time to take your profits and exit Tesla. But if you are a Musk bull (and I know a lot of them), then this may be your best opportunity to buy a wounded company at a steep discount. But if that's your play, be prepared for a very volatile ride, and plan for a long-term horizon.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
