Analyst: Musk-Trump feud a major twist in Tesla’s stock market story
And for Tesla, narrative matters more than fundamentals.
Barclays’ Dan Levy is one of the few brave Wall Street analysts willing to wade into the Trump-Musk spectacle, publishing a note Friday with thoughts on how to make market sense of the remarkable public bust-up that wiped $150 billion or so from Tesla. Levy, who has an “equal weight” rating on the shares, writes:
“We believe the broader significance of the exchange is that it reflects a reversal of Tesla’s narrative, which had been at a high.
As a reminder, Tesla’s strength post election was largely off the excitement of Elon Musk’s connection with Donald Trump.
We’d argue that the move was likely overkill, but given the strength of the stock in the face of weak fundamentals, we are not fully shocked that an optical blow to the narrative drove a move like this...
We remain slightly negatively biased on the stock — it’s still possible that the Robotaxi launch underwhelms. And perhaps more importantly, we believe the stock hasn’t fully confronted weak fundamentals / challenged auto sales, which don’t seem to matter… until they eventually matter.”
For much of the last year, the ability of Tesla shares to shake off a long string of staggeringly bad news on its core automotive business left fundamentally minded analysts flummoxed. And in many ways, as Levy commented, the right comp for Tesla is bitcoin or some other crypto asset, which has no actual business and trades on market vibes.
That’s because markets are not just bloodless discounting machines constantly calculating the potential for profits over the next 12 to 18 months. They’re also a human institution. And when humans are involved, stories matter. This is even more the case for stocks with a large chunk of individual investors holding shares. About 30% of Tesla shares are thought to be owned by retail traders.
Over the last decade, no one has been more of a master manipulator of market narratives than Elon Musk, who’s combined his extremely online public profile and fantastical visions of the future with periods of actually impressive business performance. The result? A remarkably high — and more or less durable — market premium for the shares.
Then Musk went to DC. As a result of his immersion in right-wing politics and identification with Trump, the story surrounding Tesla has shifted, as Levy said, to one where Tesla’s strength is largely derived from Musk’s personal connection with Trump. It nearly doubled in value in the month after the election, making it a major Trump trade.
With that connection ruptured — perhaps permanently — die-hard Tesla bulls are in the market for a new narrative.
