Tesla, double downgrade. But the retail army supports the stock
An ETF fund recorded inflows of $651 million, a weekly record since it was launched in 2022. Argus Research and Baird downgraded the Austin-based firm to neutral
3' min read
3' min read
Despite the stock market crash after an unprecedented political confrontation and a double downgrade, Tesla continues to exert an unparalleled magnetism among retail investors. It happened again last week: as Elon Musk lost $36 billion in personal wealth and the Austin-based company's shares suffered a 15% thud in five sessions, his most ardent supporters rushed to 'buy the downside'. An ETF fund that replicates the stock's daily movements recorded inflows of $651 million, a weekly record since it was launched in 2022. To give an order of magnitude: that's more than three times as much as in the whole of 2024, a year in which Tesla's stock was up more than 60 per cent.
The sharp drop in recent weeks, on closer inspection, has much deeper roots than the violent break-up of relations between Tesla CEO Elon Musk and President Trump. Already at the end of May, the market had reacted negatively to a series of worrying signs: sales halved in Europe and China, falling profits, and a European market share down from 1.3% to 0.6% year-on-year. Added to all this is the siege of Chinese competition, capable of offering electric vehicles at more aggressive prices and with an increasingly widespread distribution network. In parallel, Musk's political activism, in particular his closeness (and then rupture) with the Trump administration, has begun to weigh on the brand's image, especially in Europe.
The clash with Trump, which erupted publicly on 3 June, aggravated the situation. The president threatened to cut government contracts to Musk's companies after the latter scrapped the White House's budget and tax reform bill. On 5 June, Tesla lost 14% in a single session, wiping out over $150 billion in capitalisation: the worst daily slump in its history. The stock is now down 41% from its December highs.
In the midst of this storm, Argus Research and Baird downgraded Tesla to neutral. The two companies are not among the most influential on Wall Street, but their alignment signals a growing malaise among analysts. According to Bloomberg, Tesla is now the least favourite big cap among experts: only 47% recommend buying it, the lowest level among the 'Magnificent Seven', from Apple to Nvidia via Amazon and Meta.
For Argus, 'the stock now moves more on the back of non-fundamental events than actual company performance'. Baird, on the other hand, emphasises the 'key-person risk' related to Musk's unpredictability and the reputational effects of his political involvement.
