Tesla's Crossroads: Valuation Under Siege as Political Storms and Execution Risks Collide

Tesla's stock has been in free fall this year, down 27% year-to-date as of June 2025, marking it the worst performer among the “Magnificent Seven” megacap stocks. The decline has left shares nearly 40% below their December 2024 peak, sparking debates over whether this slump signals a temporary setback or a deeper erosion of Tesla's once-untouchable valuation. Analyst downgrades, political tensions, and execution risks around its robotaxi ambitions are now front and center in this reckoning.

The Downgrade Tsunami
Wall Street's skepticism reached a crescendo in early June when analysts at Baird downgraded Tesla to “Neutral,” citing heightened “key-person risk” tied to CEO Elon Musk's political entanglements and doubts over the feasibility of its robotaxi program. The downgrade followed similar actions by Argus Research, which cut its rating to “Hold.” As of June 2025, Tesla's average brokerage recommendation had dipped to 2.7 (a “Hold” status), with 44 analysts offering a median price target of $288.97—implying an 8% downside from current levels.

The bears' case hinges on three pillars: Musk's fraught relationship with President Donald Trump, the expiration of U.S. EV tax credits, and the ambitious timeline for Tesla's autonomous robotaxi fleet.

Political Crosswinds
The Tesla-Trump-Musk triangle has become a recurring headline generator. Musk's support for Trump's 2024 reelection, followed by subsequent tensions, has created an awkward dynamic. While Tesla's sales are a global affair, its brand in the U.S.—a politically polarized market—is now intertwined with Musk's persona. Analysts at Baird noted this feud has introduced a “brand risk” not previously priced into Tesla's valuation. The stock's post-Trump-election rally evaporated as the feud escalated, underscoring how non-fundamental factors can sway investor sentiment.

The EV Tax Credit Cliff
Tesla's U.S. sales growth will face a critical test in 2026, when its eligibility for the $7,500 federal EV tax credit expires due to the Inflation Reduction Act's domestic battery component rules. Analysts at Baird lowered 2026 delivery estimates by 10%, citing this loss of incentive. While Tesla's global footprint and rising China sales provide a buffer, the U.S. market remains its most profitable. Competitors like Ford and Rivian, still within the tax credit window, could gain share, compressing Tesla's margins.

Robotaxi: Moonshot or Mirage?
The most contentious issue is Tesla's robotaxi program. Musk has repeatedly vowed to deploy “hundreds of thousands” of autonomous vehicles by late 2026, a timeline analysts call “overly optimistic.” Baird projects just 6,000 robotaxis by that time, noting the technical, regulatory, and competitive hurdles. The program's success hinges not only on software but also on partnerships with cities and insurers—a domain where Tesla has no track record.

The stakes are enormous. If Tesla's robotaxi vision falters, its $295 stock price—already 30% above analysts' median target—may overvalue its long-term potential. Conversely, if the program succeeds, it could unlock a $1 trillion market in autonomous ride-hailing.

Is Tesla a Buy Now?
The question investors must ask: Does Tesla's current valuation of roughly $630 billion reflect these risks, or does it underprice its long-term opportunities?

On one hand, Tesla's fundamentals remain robust. It delivered 1.46 million vehicles in 2024, and its battery technology and scale give it cost advantages over rivals. GuruFocus's $270.55 fair value estimate suggests the stock is overvalued by 8%, but this ignores the upside of a successful robotaxi rollout.

On the other hand, the near-term risks are undeniable. Political distractions, expiring incentives, and execution delays could prolong the stock's slump. A would reveal its volatility, but the critical test lies in 2026: delivery growth, robotaxi milestones, and margin resilience.

Investment Takeaway
Tesla's stock is now at a crossroads. Investors must decide whether to bet on Musk's ability to navigate political landmines, execute on robotaxis, and sustain growth amid tax credit losses. For long-term investors willing to stomach near-term turbulence, the stock could offer asymmetric upside if the robotaxi vision materializes. However, with execution risks elevated and valuation stretched relative to near-term fundamentals, Tesla is a speculative call rather than a core holding.

The prudent approach: Wait for concrete evidence—2026 robotaxi deployments, delivery growth above 20%, or a resolution of political distractions—before considering a position. Until then, Tesla's valuation remains a leap of faith.