Tesla’s Troubles: A Reality Check
Tesla has taken a beating in recent weeks, leading the charge in a broader market downturn.
While external factors play a role, it’s impossible to ignore Tesla’s own struggles.
The fundamentals are slipping, and the once-unshakable optimism surrounding the company is fading fast.
Sales are plunging in critical markets, and there’s little reason to believe a turnaround is imminent.
Elon Musk isn’t exactly helping matters. His increasingly controversial public persona has alienated many, and calls for boycotts are gaining momentum.
Adding fuel to the fire, Donald Trump’s recent endorsement of Tesla has only deepened the divide.
At the same time, Musk continues to use Tesla stock as collateral for personal loans, effectively treating it like a cash machine.
If shares decline further, he could be forced to offload more, triggering a self-perpetuating cycle of selling pressure.
With AI, EVs, and Musk himself losing their once-hyped allure, Tesla’s days of commanding an outsized valuation are numbered.
All said and done, I see Tesla tumbling as low as $100.
But first, a little bit about me, The Pragmatic Investor
An approach that assesses the truth of meaning of theories or beliefs in terms of the success of their practical application.
That is Pragmatism, and it guides my investment philosophy.
Simplicty is key, and that is why I have narrowed down my investing ethos into three key ideas, which combined create what I like to call, The Pragmatic Investing Pyramid.
Macro, Fundamentals and Technicals.
This is the three-pronged approach that has helped me beat markets over the seven years.
For long-term investing, there’s nothing better than understanding business cycles, macroeconomic trends and geopolitics.
On the other hand, when it comes to short-term moves in markets, the best tool we have is technical analysis.
And not just a specific form of technical analysis but a robust set of tools that can all work in conjunction to help us find great setups.
I actually recently designed my own algorithm, you can see it here:
Every week, I give a macro update, a technical analysis update on the main indexes and stocks, and I cover a stock in-depth, looking at its fundamentals.
Tesla Is Unravelling; Here’s Why
Over the past week, two major shifts—one in fundamentals, the other in sentiment—have accelerated Tesla’s decline.
Sales Slide Accelerates
Yes, Tesla is more than just a car company, but for now, vehicle sales are still its primary revenue driver.
In Germany, Tesla’s sales plummeted 74% year-over-year. Its European market share is shrinking fast.
In January, Tesla moved just 9,945 vehicles in Europe—a sharp 45% drop from last year’s 18,161, according to the European Automobile Manufacturers’ Association (ACEA). Market share tumbled from 1.8% to 1.0%.
China isn’t faring much better. Tesla’s EV sales collapsed by 49.2% in February, prompting the company to extend a $1,100 insurance subsidy to incentivize buyers—a telling sign of distress given ongoing tariff concerns.
Tesla’s revenue growth has stalled for some time now, but with these numbers, outright declines in 2025 look increasingly likely.
Elon’s Growing Distraction
The backlash against Musk is no longer just noise—it’s translating into real consequences for Tesla. Reports of vandalism at showrooms and a wave of dissatisfied Tesla owners highlight the growing sentiment shift.
Musk’s political pivot has fractured Tesla’s core customer base. Once celebrated as an environmental pioneer, his recent actions have distanced him from that identity.
Meanwhile, his focus has clearly shifted elsewhere—xAI, SpaceX (SPACE), DOGE, and other projects are consuming more of his time. The era of Musk sleeping on the factory floor is long gone.
Trump’s Endorsement Backfires
If Musk’s political associations weren’t already damaging enough, Trump just sealed the deal by publicly throwing his support behind Tesla, even stating he plans to buy one.
For investors concerned about Tesla’s brand perception, this latest development reinforces the shift in how Tesla is viewed. Musk’s alignment with Trump has long been a source of controversy, and this only intensifies the issue.
Tesla’s stock saw a brief after-hours bounce following a rough session, but Trump’s remarks wiped out those gains. As of writing, Tesla is up 5% on the day, but the broader trend remains bleak.
Tesla Could Sink to $100, Maybe Even Less
The market is waking up to reality—Tesla’s valuation is indefensible.
At its core, Tesla is still a car company with slowing growth, some intriguing AI projects, and a whole lot of baggage.
Let’s see how Tesla stacks up against peers.
If Tesla were priced like a traditional automaker—say, Toyota Motors (TM)—its price-to-earnings ratio would need to drop by a factor of 10, or its EV/EBITDA by 5.
Even compared to BYD Company (BYDD), Tesla looks expensive, trading at nearly twice the book value and 3.3x forward P/E.
Tesla’s energy and AI segments add some diversification, but even with a premium like that applied to AI darling Nvidia (NVDA), the stock is wildly overvalued.
Tesla’s P/E ratio is 3.5x Nvidia’s, and its EV/EBITDA is nearly double.
EV/EBITDA is particularly relevant here, given Tesla’s mix of businesses. Even factoring in forward EV/EBITDA, which assumes some growth, Tesla remains overvalued.
For Tesla’s valuation to align with industry peers, its EV/EBITDA would need to be closer to 10. Being generous, let’s give it a premium and raise that to 15.
To hit that level, Tesla’s stock would need to decline 60% from today’s price, implying a target of $90.
Technical Picture: No Lifelines Left
From a technical standpoint, Tesla is rapidly losing key support levels. The last real zone of volume support aligns with the 78.6% Fibonacci retracement of Tesla’s rally since 2019. If Tesla can’t hold that, its long-term bullish structure is at serious risk.
Implications Of A Tesla Demise
Tesla’s downfall could ripple through the economy, dragging the S&P 500 lower and exacerbating financial instability.
As one of the index’s largest components, a major Tesla sell-off would weigh heavily on institutional portfolios, pensions, and retail investors. T
This could spark broader risk aversion, accelerating declines across tech and growth stocks. Given Tesla’s ties to the EV supply chain, job losses and reduced investment in clean energy could follow, slowing innovation. If forced to sell more shares, Musk’s liquidity crunch could add further volatility.
Ultimately, Tesla’s crash could erode consumer confidence, worsen market sentiment, and even push the economy toward recession.
Final Thoughts
If risk-off sentiment persists and economic conditions weaken, Tesla will be one of the biggest casualties.
A 50% drop from here may seem extreme, but given the company’s trajectory, it’s not outside the realm of possibility.
Tesla was once at the intersection of everything investors craved—growth, AI hype, and the Musk factor. Now, it’s experiencing the other side of that trade.
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