Tesla (TSLA) CEO Elon Musk’s recent feud with his former ally President Trump put the spotlight on the risk of the electric vehicle stock’s “Musk premium.”
Wall Street analysts and investors have varying opinions of Tesla and its controversial chief executive. But they agree on this: Tesla stock trades at higher levels than other electric vehicle companies. In other words, it trades at a premium because of Elon Musk.
“[I]f Elon Musk was gone tomorrow, [the] stock could get cut in half,” Roth Capital Partners analyst Craig Irwin told Yahoo Finance. “There’s no question there’s a Musk premium in the shares.” Irwin holds a Buy rating on Tesla stock.
Others have different values for the Musk premium. Tesla investor Justus Parmar, who runs venture capital firm Fortuna Investments and is pro-Musk, thinks it’s closer to 10%. He added: “Tesla is one of the most volatile stocks on the entire planet … It almost trades like a meme coin at times.”
Hedgeye Risk Management analyst Jay Van Sciver, who holds a short position on the stock and is critical of Musk, thinks the premium is much higher.
“Tesla has this enormous stock market premium,” Van Sciver said. “You would lose that tech premium from Tesla if Musk went away because he is seen as this genius entrepreneur who makes it all work.”
“The reality is [Tesla’s] revenue comes from selling cars and car services,” Van Sciver explained. “If it were valued like a car company, shares would be 80%, 90% lower.” Tesla reported deliveries falling in 2024 for the first time in over a decade.
Musk’s string of controversies — from allegations of intense drug use to his apparent use of the Nazi salute — does little to sway dedicated investors. “What you’re signing up for is you’ve got a very charismatic, very brilliant CEO,” Parmar said.
But Musk’s foray into politics, particularly his recent feud with President Trump, showcased how quickly the premium on Tesla shares can erode. Last week, Musk called for Trump’s impeachment and accused the president of being “in the Epstein files,” referring to convicted sex trafficker Jeffrey Epstein.
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The social media insults from Tesla’s CEO came after he criticized Trump’s “big, beautiful” tax and spending bill, which includes provisions that would, among other things, cut the $7,500 EV credit. Trump responded to Musk’s insults by threatening to cancel US government contracts with his companies. The spat sent Tesla shares down 14% last Thursday alone. The following day, Trump said Musk had “lost his mind.”
“Trump has a million ways he can make Elon Musk miserable,” Van Sciver said. For example, he could target Tesla with tariffs, as Trump has threatened to do to Apple.
Tesla shares recovered this week after the two combatants kissed and made up a bit. The stock rose nearly 6% on Tuesday after Trump on Monday walked back an earlier decision to sell his red Tesla and said he’d “have no problem” speaking with Musk. The Tesla CEO said Wednesday that he regretted some of his posts about the president.
Trump’s friendship with Musk, the “first buddy,” was seen as a boon to the company’s robotaxi efforts. Musk joined the US government to head the newly created — and highly controversial — Department of Government Efficiency in January but left in May after his efforts sent Tesla shares spiraling from a high above $488 in December to just over $220 in April.
Despite this week’s gains, the stock is down nearly 20% for the year, trading around $333.
“[W]hen Trump won, the market was assuming that Tesla would be a beneficiary of favorable Trump policies because Elon … and maybe Elon could have some push into making more favorable EV policies ”’ or help craft better autonomous vehicle safety standards,” Morningstar analyst Seth Goldstein told Yahoo Finance.
Currently, Tesla would need to get approval from state and local governments to operate its robotaxis, he explained. “If you can replace that with a federal autonomous vehicle standard, that could greatly speed Tesla’s time to market and remove regulatory hurdles,” Goldstein said. Tesla hosts its highly anticipated robotaxi day on June 12.
Even as bullish Tesla analysts have high hopes for Tesla’s expansion into the self-driving car space, the EV maker must contend with fierce competition from its rival robotaxi maker, Alphabet-owned (GOOGL, GOOG) Waymo, which leads the market. Thursday’s event might shed light on whether Tesla can catch up.
Ahead of the event, analysts at Argus Research and Baird downgraded their ratings on Tesla shares to Hold from Buy, in part due to the potential impact of the Musk-Trump feud on the stock.
Tesla investor Parmar told Yahoo Finance, “There is some concern that if the president really doesn’t like Elon and really wants to punish Elon, he’s gonna make it very difficult for Elon to get the regulatory approvals for all of these different cars he wants to start getting on the roads that are driving themselves.”
“I’m of the opinion that cooler heads will prevail,” he said.
Others remained skeptical of a long-term peace. “I doubt that Trump will make nice with Elon after he said these very mean things,” Hedgeye’s Van Sciver said.
Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.
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