Tesla's Stock Price Backs To 2022 Level, But This Could Just Be The Beginning Of A Bigger Wipeout

When political rifts begin to tear at the foundations of a business empire, Wall Street's patience wears thin.

Since Elon Musk announced his withdrawal from DOGE in late April, Tesla's stock has surged nearly 45%. But last Thursday's public feud between Musk and Trump erased all those gains - Tesla plummeted 14% in a single day. Although it recovered slightly on Friday, the stock has essentially returned to 2022 levels, wiping out all the gains driven by Musk's political investments.

Under mounting pressure from vanishing political shelter, deteriorating fundamentals, and a shifting policy environment, analysts have begun slashing Tesla's sales forecasts. Last week, Wall Street News reported that Goldman Sachs had sharply lowered its Q2 delivery estimate for Tesla from 410,000 to 365,000, far below the consensus estimate of 417,000. The long-term outlook is equally bleak, with Goldman significantly cutting Tesla's delivery projections for the next three years.

On Monday, Baird Equity Research took the rare step of downgrading Tesla from "Outperform" to "Neutral," bluntly stating that the EV giant is facing "too many uncertainties across too many fronts."

With political uncertainty, fundamental pressures, and valuation bubbles converging, Tesla's near-term performance looks grim. In the long run, last week's crash may only be the beginning of a broader correction. In Monday's pre-market trading, Tesla fell another 2%.

Tesla Downgraded by Wall Street as Political Risks Emerge as a New Variable

The downgrade by Baird analysts Ben Kallo and Davis Sunderland is not an isolated move. Among 18 Wall Street analysts covering Tesla, only 10 now rate it a "Buy," while four recommend "Hold" and four advise "Sell." The firm maintained its $320 price target, while Tesla closed at $295 on Friday, down 26% year-to-date.

Analysts noted that while Tesla's stock had rebounded 33% since hitting its 2025 low on April 8, the rally was largely fueled by hype over cheaper models and the upcoming robotaxi service launch in Austin, Texas on June 12, which could be "overly optimistic."

What most concerns Baird analysts is the sudden deterioration in Musk's relationship with former President Trump. The firm believes Thursday's sell-off reflected three interconnected fears.

Policy shock takes center stage. JPMorgan recently warned that Trump's proposed budget bill could slash Tesla's operating profits by half. The bank estimates that eliminating consumer EV tax credits would cost Tesla $1.2 billion while scrapping carbon tax incentives would deal a $2 billion blow. With Musk and Trump now at odds, the chances of Musk convincing Republicans to amend the bill are slim.

The Vanishing political perks are also alarming. Before last week, Musk's other ventures - X's debt sales, SpaceX, and Starlink - had seemingly benefited from his political ties. Tesla investors may have hoped for similar advantages, but those hopes are now dashed.

Partisan consumption could also be further divided. TD Cowen's analysis of Tesla's U.S. sales by county political leanings shows that since Musk's alignment with Trump, sales in red counties rebounded and took a larger share, while blue counties saw declines.

TD Cowen's Itay Michaeli and his team noted that if all red counties matched Texas' EV adoption rate (which surged in Q1), U.S. EV sales could jump 39% this year. However, with Musk now opposing Trump, Republican enthusiasm for EVs - especially Teslas - may wane.

Deteriorating Fundamentals Add Insult to Injury, Shaking Wall Street's Confidence

The political storm is just one facet of Tesla's troubles. 2025 has been tumultuous for the EV maker: European sales are sluggish, with many buyers boycotting Tesla over Musk's political stance, while in China - its second-largest market - competition is intensifying.

Analysts across the board are cutting Tesla's delivery forecasts, anticipating sharper declines by late 2025 and into 2026. Goldman Sachs slashed its Q2 delivery estimate from 410,000 to 365,000, well below the consensus. The long-term outlook is equally grim, with deep cuts to Tesla's three-year delivery projections. As sales decline, margins keep eroding, and further deterioration is expected.

Other Tesla businesses also face hurdles: high-margin battery operations are hit by tariffs, while its robotaxi fleet lags behind rivals like Waymo.

Baird also trimmed its 2026 delivery forecast to account for the loss of EV tax credits. While Musk claims hundreds of thousands of robotaxis will hit roads in late 2026, Baird expects just 6,000. The analysts acknowledge that mere presence in this space matters more than volume but warn that Tesla faces tougher operational challenges and lower profitability than investors anticipate.