Date: June 5, 2025
Type: Long
Conviction: High
Time Horizon: 1-3 months
Catalyst Profile: Market overreaction, strong fundamentals, positive future outlook
The recent ~20% decline from monthly highs, including a 12% single-day drop triggered Elon Musk leaving DOGE and reports of a feud between Elon Musk and President Donald Trump, represents a gross overreaction and a fundamental mispricing of Tesla's core business. This political noise, combined with Musk's strategic withdrawal from the DOGE community, signals a critical re-focus on Tesla's operational execution and innovation. I anticipate this political friction will be short-lived due to donor optics, leading to a swift market re-rating that recognizes Tesla's underlying strength and a clearer path forward unburdened by distractions.
The market's punitive reaction to the Musk-Trump feud is disproportionate and fails to account for broader political dynamics. During Elon’s term with DOGE, Tesla's stock faced backlash and protests, contributing to periods of volatility or muted positive sentiment despite strong underlying growth. With Musk now out of office and a public feud emerging, the immediate negative stock reaction is counter-intuitive if the prior decline was truly due to political opposition. This suggests the market is reacting emotionally to headline noise rather than strategic implications. Trump will likely back down or temper his stance on Musk and Tesla. Alienating significant donors for fleeting public arguments is detrimental to fundraising and party unity, making long-term antagonism unsustainable. This political self-interest implies a swift resolution or at least a de-escalation of tensions benefiting Tesla.
Elon Musk's recent resignation from DOGE, coinciding with this political shift, is a critical positive signal. This move, along with a potential backing out of direct, high-profile government involvement, which has often fueled activist scrutiny, allows Musk to dedicate his full, unmatched strategic and operational focus on Tesla. This strategic realignment is a significant positive for shareholder value. It reduces the "activist fire" surrounding his extracurricular activities, lessens perceived distractions, and directs his full entrepreneurial energy towards addressing Tesla's production ramp, FSD development, and energy business expansion.
Concerns about "pulled government contracts" are largely misplaced for Tesla, primarily impacting SpaceX, which has the majority of government and defense contracts. Tesla, in contrast, primarily benefits from government subsidies for EVs. Crucially, news of a potential bill to remove government EV subsidies targets early 2026. This means that the next two fiscal quarters are anticipated to be beneficiaries of existing subsidy structures, providing a runway of strong performance that the market is currently overlooking. Furthermore, the political ramifications of an outright anti-EV stance that hurts Tesla, a major American manufacturer and job creator, could be detrimental to the Republican party's broader appeal and fundraising from the tech and industrial sectors. This suggests a high likelihood that the most damaging proposed subsidy removals may be tempered or reversed, providing a more favorable regulatory environment for Tesla than currently feared.
Subsidy loss.
Not expecting to DCA, as it is down substantially from highs already.
The market's recent reaction to political noise surrounding Elon Musk and the Doge separation has created a compelling undervaluation for Tesla. We believe the political tensions are temporary and the strategic shift by Musk to focus exclusively on Tesla's core business will unlock significant shareholder value. Combined with a clear runway for EV subsidies through at least Q4 2025, the current dip offers an attractive entry into a company poised for renewed operational excellence and a re-rating as clarity emerges from the current media and political frenzy.