Shares tanked by 14 per cent, cutting $153bn from its market capitalisation, after the US President and Musk had a public back and forth argument about everything from government contracts to the Epstein files.
Fiona Cincotta, senior market analyst at City Index, said: “It’s unlikely that Trump will end subsidies and contracts with Tesla. Those are obviously threats that are unlikely to come into fruition.”
Could this make it the best time to invest? Experts are divided.
“Investors looking at the shares now need to appreciate that the coming quarters for the underlying auto business are going to be tough. But the longer-term AI growth story is still very much intact, and markets are happy – for now – to look past the weaker auto business and focus on the future.
Richard Hunter, head of markets at interactive investor, said that a lot will depend on what happens next.
“Part of the question is whether the President’s ire on Musk marks a turning point. Were the pair to reconcile this could change the narrative – indeed, the shares are up by more than 5 per cent this morning in pre-market trading, showing the volatility which tends to follow this stock.”
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Jason Hollands, managing director at Evelyn, said: “Yesterday’s plunge is luring in some hopeful traders as the stock is up 6 per cent in pre-market trading in the futures market.
“Yes, Tesla is a pioneer in this space but is now facing much stiffer competition, especially from lower-cost Chinese firms like BYD. Furthermore, Tesla has become a somewhat tarnished brand among liberal-minded consumers due to Musk’s vocal political stances, not just in the US, but in Europe.”
Russ Mould, investment director at AJ Bell, agreed that Musk’s political stance could turn away potential buyers: “Musk’s outspokenness is becoming a liability for Tesla shareholders.
He added: “Tesla’s operating margins have plunged from the high-teens to the mid-single digits, a figure more in keeping with industry norms for high-end auto makers. This also suggests its edge is being eroded and Musk and his team now need to re-establish momentum in volumes, sales and profits to reassure investors.”
But, developments in products such as self-driving software, a Robotaxi, and robots, could all potentially generate significant profits in future.
Hunter said: “The decision for investors is therefore finely balanced. Is Tesla now a spent force or does the current volatility simply represent a bump in the road?”
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