How will the Trump-Musk Rift Impact Tesla Stock? One Investor Weighs In

There was always a question of whether the two large personalities of Donald Trump and Elon Musk – CEO of Tesla, Inc. (NASDAQ:TSLA) – could coexist in harmony. Now, it seems we have our answer.

When one man’s “Big, Beautiful Bill” became another man’s “Disgusting Abomination,” it became clear that these two alphas were on the fast track towards splitsville. Part of Musk’s anger is no doubt related to the removal of EV tax credits, which will make it more expensive to purchase Tesla vehicles.

The market did not take the news kindly, and Tesla’s share price plummeted drastically by double digits last week after the two titans took their differences to social media. Though TSLA recovered some of these losses on Friday, it remains down following the very public spat.

Despite the recent turbulence, investor Joseph Parrish is worried that the market has not fully digested the break between the two.

“This rift is exactly the kind of thing that Tesla’s valuation, many times its cash flow, doesn’t take into account,” explains the investor.

Looking at Tesla’s overall revenues, Parrish notes that the automotive segment – which makes up the largest portion of the company’s business – has already been down this year thanks to Musk’s previous political dalliances.

Regarding those cuts to the EV tax credits, Parrish notes Tesla uses the existing $7,500 tax incentive as a “marketing tool,” and its removal could lead to lower sale numbers. While the investor does not believe that the company’s long-term prospects will be too affected by these cuts, there could be some immediate impacts.

“The current spat with Trump and how that may trickle into federal policy won’t break the company, but it can hurt the cash flow in the near term and, with it, the valuation,” adds Parrish.

The investor ultimately points out that Tesla’s valuations really depend on the future of the company’s autonomous endeavors, such as the Robotaxi and Optimus robots projects. The investor posits that Tesla is fairly valued if everything breaks right for the company. Of course, the opposite is also true.

“Because the share price is fair for good news but a premium for bad news, I maintain my Hold rating from before,” concludes Parrish. (To watch Joseph Parrish’s track record, click here)

Wall Street, on the other hand, has mixed emotions regarding TSLA. With 16 Buys, 10 Holds, and 10 Sells, TSLA has a Hold (i.e. Neutral) consensus rating. Its 12-month average price target of $285.91 has a downside of ~3%. (See TSLA stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.