Can Elon Musk rescue the Tesla brand from his disastrous involvement with the Trump administration?
Only time will tell. But say this about the Tesla $(TSLA)$ boss and the world's richest man: He's giving it his best shot.
His latest move to poke President Donald Trump in the eye has been to announce that he is launching his own political party, apparently to be called the America Party, to compete directly against Republicans as well as Democrats in a handful of key races next year. This obviously puts Musk at odds with his former MAGA pals and has produced a predictable denunciation from Trump, who called the idea "ridiculous."
It's a brilliant public relations move. Musk's goading of the president is basically impossible to ignore and is guaranteed to produce a response. If Musk pursues his America Party, you can expect headlines for the next 18 months, with Trump and other Republicans attacking him personally.
It's only been six weeks since Musk left the Trump administration. During that time he's launched high-profile attacks, including on Trump's signature policy, the so-called One Big Beautiful Bill. That legislation, Musk said, is an "outrageous pork-filled spending bill that will massively increase the budget deficit and burden American citizens with crushingly unsustainable debt." (He's right about that.)
Wall Street seems to be taking a dim view of Musk's attacks on Trump. Tesla's stock fell another 7% on Monday. Investors fret that the administration may try to retaliate by taking away Tesla's government contracts. They may be right, though that would set up some remarkable legal battles.
Wall Street may also be worried that Musk's new political venture will be a distraction, soaking up all his time, as did his recent role in the administration.
A recent note to clients from Wedbush's Dan Ives provides the most prominent example of this sentiment. "Very simply Musk diving deeper into politics and now trying to take on the Beltway establishment is exactly the opposite direction that Tesla investors/shareholders want him to take during this crucial period for the Tesla story," he wrote.
But Musk is, at the moment, talking about something very different: Bankrolling a handful of candidates in key races.
What isn't in doubt is that Musk's high-profile embrace of Donald Trump has been disastrous for the Tesla consumer brand, and that his recent moves put daylight between him and the president.
Investors should be cheering Musk's efforts to distance himself from Trump - even if it lands him in more political hot water - because his association with the president has weighed on the stock and the brand.
As we (and others) have reported, Tesla sales have collapsed in multiple places. Opinion polls have shown the Tesla brand to be trashed. And this has been especially true among the centrists and liberals who are actually likely to buy an electric vehicle. Musk's "Dark Gothic MAGA" routine may have cheered MAGA Republicans, but they then went home and bought Cadillacs or Ford F150 trucks.
It's notable that Tesla's stock has fallen about 28% so far this year. It has badly underperformed the S&P 500 SPX, which is up about 6%; the Nasdaq Composite COMP, which is up about 8%; and even the so-called Magnificent Seven MAGS, which as a group is up 1.3% (even though one-seventh of the group is accounted for by ... Tesla).
Tesla's stock, analysts say, is increasingly a bet on Tesla's robotaxi venture. The initiative has just launched in the company's new hometown of Austin, Texas, though not without snafus.
Musk envisions a future where Tesla autonomous vehicles are effectively working 24/7, carrying either passengers or freight. It's a fascinating vision, although as always, before investors start counting their money, they need to answer some unanswerable questions. Such as: Will we ever get there? And: If so, when? And: How much money will it take first? And: How big will the profits even be? And, finally: Who will the winners be, anyway?
These are always the issues with glamorous "growth" stocks, which is why investors who gamble on them often end up losing more than they gain.
Given Musk's bold moves to hose the MAGA off the Tesla brand, it would be tempting to view the recent stock slump as a buying opportunity. Perhaps it is. But even after its recent tumbles, Tesla stock is still valued at a wild $1 trillion, or about 122 times forecast per-share earnings for the next 12 months. There has not, yet, been a collapse in bullish sentiment about the stock on Wall Street, either: According to FactSet, 44% of brokers' recommendations are to buy the stock, compared with 20% who recommend selling it. (The rest say "hold"). That's not much different than it's been over the past year.
As always, the best time to buy is when the bulls have all given up.
But at least Musk is trying to rescue the brand.