Stock of the Week: Tesla - The Shine Fades as Reality Bite
Elon Musk’s polarizing presence and mounting business headwinds put the spotlight back on Tesla’s vulnerabilities
Here is the 20th edition of “Stock of the Week”. You can find all the previous analyses and my articles on my main page (for an easier search, use a computer, mobile version is harder to navigate).
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This week, we are turning the spotlight on Tesla. Following a high-profile clash with Donald Trump and troubling market share data, the stock is facing significant pressure. Let’s break down what is happening and explore a clear-eyed view of the company’s current position.
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The stock at a glance!
Recent news
The Trump - Musk relationship shifted dramatically in just a few months
From alliance to fallout (from Nov 2024 to May 2025). Elon Musk emerges as a key Trump ally, donating nearly $300M to his campaign and co-leading the Department of Government Efficiency (DOGE). Despite public praise and joint appearances, tensions rise as Musk criticizes Trump’s major spending bill, ending his DOGE role in late May
Feud Goes Public (June 2025). Their rift explodes after Musk’s harsh criticism and explosive claims on X. Trump retaliates with threats to cut contracts with Musk’s companies. Tesla stock plunges 14%, wiping out $150B in value. By June 7, hostilities cool slightly, but the political and financial damage is already done
This is an Icarus story: soaring too close to the sun, only to come crashing back to Earth… and in this case, quite spectacularly
Negative signals are piling up
Tesla is under increasing pressure from intensifying competition in the EV space. Market share is crumbling in key regions, with May sales plunging across Europe: Germany (–36%) / UK (–45%) / France (–67%) / Spain (–29%) / Denmark (–30%)
What makes this more alarming is that EV sales in these same markets are actually rising. For example, up +45% in Germany and +70% in Spain. Tesla is clearly losing ground to competitors
Additionally, insider activity has raised red flags, with board members selling shares
Yet, positive developments remain. Not all is bleak. Tesla continues to advance in innovation and strategic positioning:
The Optimus humanoid robot demonstrated notable progress at a showcase in late 2024
Tesla is reportedly in talks with major automakers to license its Full Self-Driving (FSD) software, which could open up new high-margin revenue streams
The company is also doubling down on energy storage, robotaxis and AI, areas with long-term growth potential
In some markets, Tesla continues to hold firm. South Korea, for instance, remains a bright spot in terms of market share retention
Last earnings report
Tesla’s Q1 25 total revenues declined 9% YoY to $19.3B, driven by a steep 20% drop in automotive revenue. Although energy storage revenue rose 67%, it was not enough to offset automotive weakness.
Gross profit fell 15% to $3.15B, with the GAAP gross margin narrowing significantly to 16.3%, down 104 basis points year-over-year. Income from operations collapsed 66%, and the operating margin shrank to just 2.1%. Such contractions are to be expected when a company with high fixed costs experiences a decline in sales.
Analysts’ recommendations
June, 06. Goldman Sachs. Hold. $295 —> $285
June, 02. DBS Bank. Hold. $275 —> $350
May, 23. Wedbush. Buy. $350 —> $500
May, 16. Mizuho. Buy. $325 —> $390
April, 24. Argus. Buy. $488 —> $410
My analysis
Despite the disappointing results, analysts still project approximately 20% revenue growth in both 2026 and 2027. However, if weak performance persists, Tesla’s current valuation (trading at around 10x sales, comparable to high-growth software companies with far superior gross margins) will become increasingly difficult to justify
The ongoing loss of market share is arguably the most concerning aspect of Tesla’s current situation and the high-profile feud between Elon Musk and Donald Trump may only accelerate this decline. When politics and business become entangled, the risk of reputational and commercial fallout increases significantly
Meanwhile, shareholder dilution continues, partly to fund Musk’s massive compensation package, a controversial point given the company’s current financial struggles
Tesla’s valuation and stock performance are still largely driven by narrative, the enduring belief that Musk can turn any venture into gold. But as I have outlined, there are multiple red flags that make blind faith a risky strategy. Investing based solely on storytelling resembles speculation more than sound analysis. That is not my investment approach, and for now, I am staying on the sidelines
Technical analysis
I have defined three buying zones that I find interesting for long-term investments during pullbacks. While these zones may not be reached, I am prepared for a market (or stock) consolidation to seize long-term opportunities. For me, this approach offers a better risk/reward ratio.
Of course, this is just my opinion, and I am sharing it with you, but each investor should decide on their own investment style. With that said, here are my three buying zones for Tesla.
Buying zone 1. $200
Buying zone 2. $110
Buying zone 3. $64
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Used source: Marketscreener.com. Affiliate link just here
I am a fan of Elon Musk, and I wish him well. But I don’t understand why Tesla only uses cameras for self driving and Robotaxis. The world’s leaders in autonomous driving taxis are Waymo in the US, and Baidu Apollo Go in China. They use Cameras, Lidar, Radar, GPS, and AI. Here is there market share in the world wide autonomous Taxi markets, in terms of actual paying passengers. Waymo 65%, Baidu Apollo 28%, others 7%. Tesla is zero. ( Source Google Gemini). Tesla had a lot of catching up, and it remains to be seen if a single sensor modality of a camera only, is sufficient.
Tesla stock is polarizing? How does that happen? Elon Musk is Tesla. He is only polarizing to a few People who want to miss the next couple trillion in value. Not a smart move by investors not willing to study the greatest manufacturing company in the world. The shine is not fading at all. It’s about to grow brighter.