Tesla Inc. Stock Analysis Amid Elon Musk-Donald Trump Feud and Market Challenges | Monexa AI

Tesla Stock Faces Volatility Amid Elon Musk-Donald Trump Feud#

Tesla, Inc. (TSLA experienced a significant stock price decline, trading at $304.03 with a -4.29% drop on July 1, 2025. This movement follows an intensified public feud between CEO Elon Musk and former President Donald Trump, which has introduced heightened political risks and market uncertainty. The feud threatens Tesla’s access to federal subsidies and contracts, contributing to a market cap erosion from over $1 trillion to approximately $978 billion, reflecting a $43 billion loss since the last close.

This political conflict creates a notable overhang on Tesla's valuation, overshadowing the company's technological advancements and market expansion efforts. The stock also breached its 200-day moving average, a technical indicator signaling potential further downside unless political tensions ease or company fundamentals improve.

Financial Performance Review: Revenue Growth Amid Profitability Pressure#

Tesla reported $97.69 billion in revenue for FY 2024, a slight increase of +0.95% compared to $96.77 billion in FY 2023. However, net income dropped sharply by -52.46% to $7.13 billion from $15 billion the prior year, signaling margin compression. This decline is reflected in the net income ratio, which fell from 15.5% in 2023 to 7.3% in 2024.

Operating income also declined to $7.08 billion (-20.37% YoY), with operating margins narrowing from 9.19% to 7.24%. Tesla's gross profit margin slipped to 17.86% from 18.25%, indicating increased costs or pricing pressures. Research and development expenses rose to $4.54 billion (+14.36%), emphasizing Tesla’s continued investment in innovation despite profitability challenges.

Financial Metrics Snapshot#

Metric	FY 2024	FY 2023	Change (%)
Revenue	$97.69B	$96.77B	+0.95%
Net Income	$7.13B	$15.00B	-52.46%
Operating Income	$7.08B	$8.89B	-20.37%
Gross Margin	17.86%	18.25%	-0.39pp
Net Margin	7.3%	15.5%	-8.2pp
R&D Expenses	$4.54B	$3.97B	+14.36%

Tesla’s free cash flow declined by -17.81% to $3.58 billion in 2024 from $4.36 billion in 2023, reflecting increased capital expenditures ($11.34 billion in 2024 vs. $8.9 billion in 2023). Despite this, operating cash flow grew +12.58% to $14.92 billion, underscoring operational cash generation strength.

Balance Sheet and Financial Health#

Tesla maintains a strong liquidity position with $16.14 billion in cash and cash equivalents and $36.56 billion in cash plus short-term investments as of December 2024. The company’s current ratio remains healthy at 2x, indicating solid short-term asset coverage over liabilities.

Total assets increased to $122.07 billion (+14.5% YoY), driven by property, plant, and equipment growth to $51.51 billion (+14.2%). Total liabilities rose moderately to $48.39 billion, while stockholders' equity expanded to $72.91 billion (+16.4%), reflecting retained earnings growth and capital accumulation.

Tesla’s net debt is negative at -$2.52 billion, showing more cash than debt, which provides strategic financial flexibility amid market volatility.

European Market Challenges and Sales Decline#

Tesla’s European sales have suffered a pronounced downturn, with a 67% drop in French sales in May 2025 and a 60.4% decline in German sales during the first four months of 2025, despite a 53.5% growth in the German battery electric vehicle (BEV) market. The discrepancy highlights Tesla’s loss of market share amid intensifying competition from domestic automakers like Renault and Citroën and Chinese entrants such as BYD and MG.

This decline is compounded by consumer backlash linked to Elon Musk’s political statements, which have spurred boycotts and damaged brand perception in Europe. However, markets like the UK showed resilience, with a 224% increase in EV registrations in June 2025, suggesting regional variability in Tesla’s performance.

Technological Advancements: Dojo and AI Leadership#

Despite political and market headwinds, Tesla continues to advance its AI and autonomous driving technologies. The Dojo supercomputer remains central to Tesla’s AI strategy, enabling high-speed neural network training with proprietary D1 chips. This vertical integration reduces dependency on external GPU suppliers and enhances Tesla’s ability to scale autonomous driving capabilities.

Tesla’s vision-based Full Self-Driving (FSD) system differentiates it from competitors like Waymo and Cruise, which rely on multi-sensor arrays including LiDAR and radar. Tesla’s extensive real-world data collection via its fleet bolsters its AI training, positioning it as a leader in physical AI applications.

Market Valuation and Forward Outlook#

Tesla’s price-to-earnings (PE) ratio stands at an elevated 174.73x, reflecting high growth expectations despite recent earnings pressure. Forward PE estimates show a declining trend from 150.47x in 2025 to 36.98x by 2029, indicating anticipated earnings growth and margin recovery.

Year	Forward PE	Forward EV/EBITDA
2025	150.47x	63.48x
2026	107.49x	52.30x
2027	79.84x	43.33x
2028	55.74x	36.86x
2029	36.98x	29.12x

Analyst consensus projects revenue growth CAGR of approximately 21.51% and EPS CAGR of 42.03% through 2029, suggesting optimism about Tesla's ability to overcome current challenges and regain profitability.

What Does This Mean for Investors?#

• Key Takeaway 1: Tesla’s stock volatility is largely driven by the Elon Musk-Donald Trump feud, which risks federal subsidies and contracts worth billions annually. Investors should monitor political developments closely.

• Key Takeaway 2: Despite revenue growth, Tesla faces margin compression and profitability declines, pressured by rising costs and competitive market dynamics, especially in Europe.

• Key Takeaway 3: Tesla’s continued investment in AI and autonomous driving technology, particularly through its Dojo supercomputer, provides a potential long-term competitive advantage.

• Key Takeaway 4: Strong liquidity and negative net debt offer Tesla financial flexibility to navigate political and market uncertainties.

• Key Takeaway 5: Forward valuation metrics indicate market expectations for significant earnings growth, but execution risks remain amid geopolitical tensions.

Conclusion#

Tesla, Inc. stands at a crossroads where political controversies and competitive pressures challenge its near-term financial performance and market valuation. The ongoing feud between Elon Musk and Donald Trump introduces a unique political risk factor that could materially impact Tesla’s access to critical subsidies and contracts. Meanwhile, declining European sales underscore the importance of product refreshment and regional strategy adaptation.

However, Tesla’s robust cash position, continued technological innovation, and long-term growth prospects reflected in analyst projections suggest the company retains the capacity to rebound. Investors should weigh the immediate risks against Tesla’s strategic initiatives in AI and autonomous driving, which could reshape the automotive industry landscape.

For a comprehensive understanding of Tesla’s evolving position, monitoring political developments, quarterly earnings updates, and competitive responses in the EV market is essential.

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Sources#

• Times of India - Impact of Trump-Musk Feud on Tesla Shares
• Al Jazeera - Elon Musk Slams Trump
• CBS News - Trump and Musk's Federal Subsidies
• Forbes - Musk's Net Worth and Political Battles
• Hindustan Times - Tesla Shares Drop
• Electrek - Tesla Sales in France
• Mobility Portal - Tesla's European Market
• TeslaRati - Tesla's Sales Decline
• DataScienceDojo - What is Tesla Dojo