Tesla shares fall 8%, giving up some gains from the post-election rally

Tesla Shares fell more than 8% on Wednesday, marking their biggest decline since Donald Trump’s election victory last month, which sparked a strong rally in stocks.

Tesla closed at $440.13 and is still up 75% since Election Day on November 5th. Last week, the stock climbed to a record high, surpassing its previous high in 2021. Before Wednesday’s decline, it had continued to rise, closing at a high of $479.86 on Tuesday.

“Most investors we speak to have been taken aback by the magnitude of the rally and are increasingly confused about how to approach the stock as it appears to be largely disconnected from fundamentals,” Barclays analysts wrote in on Wednesday a report. They have the equivalent of a Hold rating on the stock and a $270 price target.

The drop coincided with a sharp decline in the broader market, including a 3.6% decline in the Nasdaq, the second-worst day of the year for the tech-heavy index.

Tesla has rallied 38% in November, its best monthly performance since January 2023 and the 10th best on record. CEO Elon Musk was a key supporter of Trump, investing $277 million mostly in his campaign, Federal Election Commission filings show.

Now Musk, the world’s richest person, is set to head the Trump administration’s Department of Government Efficiency, which will act as an advisory office, alongside former Republican presidential candidate Vivek Ramaswamy.

His new role could include Musk, who also runs SpaceX and the social media company Musk said during a Tesla earnings call in October that he intended to use his influence with Trump to establish a “federal approval process for autonomous vehicles.”

While Tesla still doesn’t make robotaxis or operate driverless ride-hailing services, its biggest domestic rival Waymo said on Wednesday it completed over 4 million paid robotaxi rides in 2024 as it expands its commercial operations in the US

“Tesla is Elon Musk’s only publicly traded company and has often served as a proxy for an investment in Musk himself,” Barclays analysts wrote. “This value has understandably increased, but this, in our view, exacerbates the already high key man risk in Tesla stock.”

On Wednesday, a Quinnipiac poll found that 53% of U.S. voters disagree with Musk “playing a prominent role in the Trump administration.” The divide was stark across party and gender lines – just 31% of women surveyed said they approved of Musk having a major role in the next administration, and just 5% of Democrats agreed.

Musk has also complained in recent days that the SEC has filed a “settlement demand” related to his 2022 sale of Tesla shares as he looks to buy Twitter, now known as X.

An SEC spokesperson declined to discuss the matter, telling CNBC that the agency is conducting investigations “on a confidential basis to protect the integrity of its investigative process.”

Tesla is expected to report its fourth-quarter and year-end vehicle deliveries in January. Since Tesla hasn’t added a major new vehicle to its lineup since it began delivering Cybertrucks in November 2023, it is working to boost sales of its electric vehicles with a range of incentives, such as 0 percent financing.

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