Tesla Shares Tumble 5% Amid Fears of Retaliatory Tariffs

Tesla (TSLA) shares took a nosedive on Monday, February 3, 2025, plunging by more than 6% as investors grappled with the potential impact of retaliatory tariffs from Canada and Mexico. The stock closed at just over $342 per share on November 20, 2024, but has since surrendered most of those gains, now standing around $384. The company's stock price has been volatile in recent months, with analysts offering a range of opinions on its trajectory.

The recent decline in Tesla's stock price can be attributed to several factors, including the company's disappointing fourth-quarter earnings and the looming enforcement of tariffs on China and Canada. Musk recently conceded on an earnings call with analysts that while Tesla has tried to localize its supply chain, it's "still very reliant on parts from across the world for all our businesses. Therefore, the imposition of tariffs, which is very likely, will have an impact on our business and profitability."

The concern surrounding overseas sales and tariffs comes on the heels of the company's earnings miss in the fourth quarter of 2024. Tesla reported earnings of 73 cents per share, compared to analyst expectations of 76 cents, and revenues of $25.71 billion, versus an anticipated $27.26 billion. Revenues were down 8% compared to the same quarter the year prior. All totaled, the automaker delivered 1.8 million vehicles to customers in 2024, marking the first time Tesla deliveries came in lower than the year before.

Tesla's high price-to-earnings ratio, which stood at 188.95 on Monday, indicates that the company could be overvalued. This, coupled with the potential impact of retaliatory tariffs, has raised concerns among investors. However, some analysts, such as Wedbush, remain bullish on the stock, citing a second Trump term as a potential regulatory win for Tesla and its robotaxi plans. On the other hand, JPMorgan analysts have expressed concern that Trump's promise to eliminate clean energy programs like EV tax credits could slow Tesla's sales as competition continues to increase in the EV market.

As Tesla continues to navigate the challenges posed by retaliatory tariffs and increased competition, investors will be closely watching the company's stock price and financial performance. The company's ability to adapt to changing market conditions and maintain its competitive edge will be crucial for its long-term success. With a clear positive bias towards the subject, it is essential to balance emotional resonance with clear, concise data to make the argument compelling.