Tesla's Turbulent Stock Ride: Analysts Downgrade Amid Musk's Bold Promises and Political Drama

Tesla's stock recently experienced a turbulent ride as several bullish Wall Street analysts decided to take a step back, citing numerous reasons for caution. On Monday, analysts Ben Kallo and Davis Sunderland from Baird downgraded Tesla's stock rating from "outperform" to "neutral," following Argus Research analyst Bill Selesky's decision to lower his rating from "buy" to "hold."

Baird highlighted the rebound in Tesla's stock price, which saw a 33% increase since April 8, after touching a yearly low due to poor quarterly performance. They attributed this rally primarily to excitement around affordable electric vehicles and the anticipation of the launch of automated taxi services in Austin, Texas, on June 12.

CEO Elon Musk has promised that the number of self-driving taxis will reach several hundred thousand by the second half of next year. However, Baird analysts project only around 6,000 vehicles initially, noting the importance of entering this market despite the potentially challenging and less profitable environment than investors currently anticipate.

Furthermore, Baird analysts expressed concerns over Musk's optimistic predictions, claiming these sentiments have already been factored into Tesla's stock price.

The ratings downgrade follows Musk's public altercation with former President Trump, which adds another layer of uncertainty. The once favorable relationship now questions potential brand damage, and analysts urged the need for consistent evidence of sales growth to mitigate these doubts.

The shift in Tesla's ratings comes amidst growing competition in the electric vehicle market from players like Ford and General Motors, who are rapidly advancing in manufacturing. Argus's Selesky also cited non-fundamental events as primary drivers of Tesla's current stock price, and suggested concerns over political tensions and tax credit expirations could impact demand.

Kallo and Sunderland maintain a long-term optimistic view of Tesla's prospects, considering it a "core holding," with potential in the realms of automated taxis and robotics. Nevertheless, caution is advised due to the dynamic challenges resulting from Musk's political engagements and the uncertainties tied to Tesla's future initiatives in autonomous vehicles.