Why Tesla stock tumbled 28% in February

The stock ran into a wall in February.

| More on:
tesla cybertruck

Image source: Tesla

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

After soaring following the election, Tesla (NASDAQ: TSLA) stock ran into a wall in February as a number of news items, macro challenges, and CEO Elon Musk's involvement in the Department of Government Efficiency (DOGE) initiative all seemed to contribute to a sharp pullback in the stock.

When the dust settled for February, the stock had lost 28%, according to data from S&P Global Market Intelligence.

As the chart below shows, the stock fell through most of the month.

^SPX Chart

^SPX data by YCharts

The Tesla-Trump trade is over

Tesla stock soared following the election as investors seemed to believe that Musk's close relationship with Donald Trump would benefit his EV company. However, that thinking seemed to unravel last month as there's little that Trump can do to directly support Tesla, and Musk's persona seems to be turning off some potential customers due to his leadership in federal government layoffs, support for a far-right party in Germany, and other moves.

There wasn't a single factor driving Tesla stock lower last month, but investors seemed to believe that the stock was overvalued following a post-election run-up in the price that came with little change in the business's fundamentals. Investors seem to believe that Musk's work with the Trump administration is becoming a distraction to him. Additionally, the stock fell after he put together a $97.4 billion offer with other investors for OpenAI.

Tariffs are also likely to weigh on Tesla as they will on the rest of the auto sector, and pressure on China could also impact a valuable market for Tesla.

According to European registration data, a proxy for sales, Tesla registrations in Europe dropped by 45% in January on a year-over-year basis, even as overall sales of EVs were up 37%.

That's just one month's worth of data, so it could be subject to supply chain fluctuations or similar issues, but if the trend holds, it could be devastating for Tesla. There's other anecdotal evidence that sales are declining in California, and that anti-DOGE protestors have taken to Tesla stores.

What it means for Tesla

It's difficult to say what the reputational risk or damage to Tesla stock is from Musk's embrace of politics, but there clearly is some.

If the fundamentals of the business were stronger, Tesla stock might be closer to a floor, but the company reported a decline in vehicles sales last year, and the stock is still expensive, trading at a price-to-earnings ratio well above 100, meaning it could still fall a lot further. Investors are hopeful that AI and robotaxis will drive the next leg up for the stock, but maintaining a strong reputation with consumers is key for making that happen. Musk may be destroying those prospects without knowing it.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

Warren Buffett
International Stock News

Countdown to Berkshire's AGM: What do investors expect to hear from Warren Buffett this year?

All eyes will be on Omaha, Nebraska this weekend.

Read more »

A smiling woman holds a Facebook like sign above her head.
International Stock News

Meta surges on blockbuster earnings report

It's a good day to be a Meta investor.

Read more »

A family sits on their couch, eyes glued to the television.
International Stock News

Can Netflix be a $1 trillion company by 2030?

How much more can it grow its subscription base?

Read more »

A man looking at his laptop and thinking.
International Stock News

Stock-split watch: Is Nvidia next?

It was nearly one year ago that Nvidia last split its stock.

Read more »

A man looking at his laptop and thinking.
International Stock News

Here's why Berkshire Hathaway stock is a buy before May 2

Giving Buffett and his team your cash to invest for you is likely to be a solid choice no matter…

Read more »

Robot dab indicating a rocketing ASX share price
International Stock News

For Tesla shares, the future rests on autonomous driving and robotics

Tesla has been under pressure lately, with EV demand dwindling.

Read more »

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
International Stock News

Which Magnificent Seven company is currently the cheapest?

The cheapest 'Mag Seven' stock today might surprise you.

Read more »

Warren Buffett
International Stock News

7 things to know about Warren Buffett's Berkshire Hathaway — Some may surprise you

See how many you didn't know, and then consider whether you might want to invest in Berkshire Hathaway.

Read more »