Tesla Stock Falls Amid Musk Vs Trump Feud

Tesla TSLA shares had their worst day since March, falling 14% on Thursday as the feud between Elon Musk and President Trump continues to heat up, and is making international headlines.

In the aftermath of his 130-day term ending as a special government employee, Musk has publicly criticized the Trump administration’s budget reconciliation bill after previously heading the Department of Government Efficiency (DOGE).

The Pros of Musk’s DOGE Exit

Despite losing favoritism in the White House, Tesla shareholders have previously called on Musk to focus his attention back on the leading EV maker amid declining sales. Underlying this is that having a CEO push a political agenda had disrupted public sentiment, with Tesla facing significant losses of more than $100 million this year regarding vandalism at its dealerships and EV charging stations, which spilled over from nationwide protests targeting Elon Musk. 

This also created a somewhat unnecessary way for General Motors GM and Ford F to potentially take more share of the domestic EV market, with the public outcry of the “Tesla Takedown” movement coming as the DOGE cut thousands of federal jobs at the discretion of the world’s wealthiest person.

The Cons of Musk’s Fallout with Trump

Adding fury to Musk’s frustration with President Trump’s budget reconciliation bill is that it will eliminate tax credits for electric vehicles that have benefited Tesla and other EV manufacturers, while undermining his cost-cutting efforts as head of the DOGE.

However, harsh criticism and a personal vendetta against the Trump administration could, of course, make Tesla the target of harsher EV regulations in the U.S., with the President threatening to take away the company’s government contracts. Furthermore, this comes on the heels of recent reports that Tesla’s sales have continued to decline in Europe, as sales in May fell 45% year over year in the U.K. and 36% in Germany amid rising competition from Chinese EV brands such as BYD and XPeng XPEV. Notably, BYD has surpassed Tesla as the top-selling EV brand in Europe.

TSLA Technical Analysis

Most concerning to technical traders is that TSLA has fallen below its 50-day simple moving average (Green Line) of $292 a share, which is lower than its 200-day SMA (Red Line) of $310 due to the recent volatility in the stock. Generally, the 200-day SMA is lower than the 50-day SMA when a stock is in an uptrend and higher than the 50-day SMA when a stock is in a downtrend, as in Tesla’s case.

Declining EPS Revisions

Also suggesting more risk ahead for Tesla stock, and correlating with news of declining sales in Europe, is that fiscal 2025 and FY26 EPS estimates are noticeably lower in the last month and have now dropped 25% and 18% over the last 60 days, respectively.

TSLA Net's 20% Gains on Zacks Short Sale List

Considering the short-selling strategy has paid off with TSLA of late, with it noteworthy that Tesla has led the Zacks Short Sale List with +20% gains after borrowing shares at $358.91 on Tuesday, May 27.  

Conclusion & Final Thoughts 

The back-and-forth spat between Elon Musk and President Trump won’t do any favors for Tesla’s outlook. Unfortunately, TSLA lands a Zacks Rank #5 (Strong Sell) at the moment in correlation with the trend of declining earnings estimate revisions.

Eventually, this could end up being a lucrative buying opportunity for TSLA down the road, but a dispute between the world's most powerful and wealthiest person could drag down the broader market as well, with Tesla dragging the Nasdaq down roughly 1% on Thursday. 

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This article originally published on Zacks Investment Research (zacks.com).

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