What Happened?

Shares of electric vehicle pioneer Tesla (NASDAQ:TSLA) fell 4.4% in the morning session after stocks of electric vehicle makers tumbled following reports that the new Trump Administration may eliminate subsidies for electric vehicles. There are also worries that the Trump administration might impose more restrictions on other programs, including grants and tax credits, which could weaken the adoption of electric vehicles.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Tesla? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Tesla’s shares are extremely volatile and have had 112 moves greater than 2.5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The previous big move we wrote about was 14 days ago when the stock dropped 3.3% on the news that Bank of America analyst John Murphy downgraded the stock's rating from Buy to Hold, citing "execution risk." Some of the areas of concern include "1) Introduction of a low cost model in [first half of 2025] and another new model in [second half of 2025] (key drivers of volume growth); 2) Launch of robotaxi in mid-2025; 3) Megapack production ramp at Shanghai assembly plant starting in 1Q:25; 4) Updates on [full self-driving] subscribers."

Tesla is up 9.1% since the beginning of the year, but at $413.87 per share, it is still trading 13.8% below its 52-week high of $479.86 from December 2024. Investors who bought $1,000 worth of Tesla’s shares 5 years ago would now be looking at an investment worth $11,345.

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