What Happened?

Shares of electric vehicle pioneer Tesla (NASDAQ:TSLA) fell 7.4% in the morning session as stocks grappled with more uncertainty after President Trump criticized the Federal Reserve's approach to interest rate cuts, warning that the pace was slow and could hinder economic growth. Trump's comments added pressure to an already sensitive market, raising concerns about political interference in monetary policy. 

Meanwhile, Fed Chair Jerome Powell maintained a cautious stance the previous week, highlighting the difficulty of balancing the dual mandate of steady employment and price stability amid the escalating trade tension. Investor sentiment was further dampened by the absence of constructive progress in trade negotiations, especially US-China relations which took a turn for the worse in the previous week. 

Overall, the outlook seemed more unclear heading into the first quarter 2025 earnings season, as a combination of hard to predict monetary policy and unresolved trade tensions weighed on business confidence. 

Separately, Reuters reported that the company might postpone the launch of a more affordable version of its Model Y electric vehicle. This delay occurred as Tesla struggled with weak sales due to competition and growing brand perception issues in key markets like Europe and China. Therefore, the delay raised concerns about the company's ability to expand its customer base and sustain volume growth. As a result, investors might lose more confidence in Tesla's ability to hit its full-year delivery and revenue targets. 

Also, Barclays analyst Dan Levy lowered his estimate of the stock's valuation, citing "confusing visibility" a day before the company released its first quarter 2025 earnings.

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What The Market Is Telling Us

Tesla’s shares are extremely volatile and have had 126 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 11 days ago when the stock dropped 10.7% as Wall Street sentiment toward the company turned more bearish, with several analysts cutting their forecasts and price targets. 

UBS analyst Joseph Spak issued the most bearish outlook, slashing his price target to $19, implying a potential 30% downside. Spak warned that while lower 2025 earnings expectations were becoming consensus, the broader earnings trajectory for Tesla still appeared overly optimistic and remained vulnerable to further downward revisions after Q1 2025 earnings are released. 

Similarly, Goldman Sachs lowered its price target from $275 to $260, reflecting growing near-term risks. The firm pointed to weakening auto demand, softer consumer sentiment, rising tariff-related costs, particularly within Tesla's Energy division, and increasing uncertainty around U.S. EV policy. Despite these headwinds, Goldman highlighted that the long-term potential from Tesla's AI-driven initiatives could serve as a meaningful offset, providing an avenue for future growth beyond its traditional automotive business. 

Separately, stocks gave back some of the gains from the previous day as the White House clarified the tariffs on imports from China would add up to 145%, while the baseline 10% tariffs remained in place for all countries. This reminded investors that the global trade environment remained volatile, limiting the potential for sustained market gains. Also, President Trump said he was willing to accept pain in the short term, and was aware his policies could cause a recession, but he remained more mindful of a more severe case of economic depression (higher unemployment and prolonged downturn). 

For investors, this suggested that the administration could prioritize long-term structural shifts over near-term economic stability, further increasing policy-driven risk in the markets.

Tesla is down 40.7% since the beginning of the year, and at $224.99 per share, it is trading 53.1% 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 $4,914.

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