The stock has fallen to the 320 range from the 340 to 350 range, because of the spat between President Donald Trump and Elon Musk. I believe the two will make peace, and the feud will turn into a non-issue, relieving pressure on TSLA shares.
The fear is that Trump can vindictively use the federal government to go after Musk. This is certainly a possibility, but a remote one in my view. Even if Trump decided to do this, SpaceX is more vulnerable than TSLA, since SpaceX is more exposed to the federal government due to larger contract size and regulatory vulnerability. But the U.S. government relies on Musk for access to space, so Musk holds a strong hand here.
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There are plenty of reasons not to buy TSLA other than the Trump feud.
Valuation seems extreme at around 137 times forward earnings. Not only is that high in the absolute sense, it is also a 74% premium to the trailing five-year average for this metric. Morningstar, a value-oriented shop, has a three-star rating on the stock, which is not very attractive (out of a maximum of five). On the other hand, at 10.8 times sales, the stock trades at an 11% discount to the trailing five-year average for this metric.
Two other apparent problems are 1) that the federal government may be lifting EV mandates and subsidies, and 2) Musk has severely damaged the Tesla brand with his DOGE activities, and now again with his Trump attacks. He seems to have successfully alienated both sides of the political spectrum. But now that he seems to be pulling back from politics, this damage can probably only improve from here. We are currently at peak brand damage.
Beyond that, to me, Tesla is more of a play on robotics for use in factories and elsewhere, and autonomous driving, which is really starting to gain traction. To some degree, these themes move TSLA into the “meme stock” category. You do not want to have too much exposure to meme stocks. But as we have seen, some exposure makes sense because meme stocks can do quite well when they click in. It is also a positive that Musk is out of government for now, and back at the wheel, focusing on developing his companies again.
I view TSLA as both a long-term multi-year hold and also a swing trade for resumed strength as concerns about the Trump-Musk feud fade. There is insider buying to support my case, in that a director put $1 million into the stock at $256.31 back around April 24.
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