Tesla just pulled off a bigger upset than the Knicks beating the Celtics in the playoffs: Despite reporting a brutal 49% decline in European sales last month, the company ended the day up 6.94%.
One reason? President Trump announced over the weekend that 50% tariffs on the EU will be paused until July, driving a market-wide surge. But perhaps an even more significant catalyst for Tesla was the prospect of cult leader CEO Elon Musk returning to the driver’s seat full-time, after he posted on X that he is “back to spending 24/7 at work.”
Musk is more directly intertwined with Tesla’s success than your average CEO. “2025 started off as a dark chapter for Musk and Tesla as Elon's role in the Trump Administration and DOGE created a life of its own which created brand damage and a black cloud over the story,” wrote Wedbush analyst and Tesla bull Dan Ives in a recent note. “But importantly those days are in the rear-view mirror as we are now seeing a recommitted Musk leading Tesla as CEO into this autonomous and robotics future ahead with his days in the White House now essentially over.”
EV drag race
But like the Knicks, one upset doesn’t make a champion, and Tesla still faces an array of roadblocks ahead. Let’s not forget that a carmaker needs to actually sell cars, and Tesla has only sold 61,320 of them in Europe through April, a 39% drop from the same period in 2024. Surveys show consumer animosity regarding Musk’s foray into politics is partially responsible.
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Meanwhile, Tesla’s main competition out of China, BYD, is putting its foot on the gas. Last week, BYD officially beat Tesla in European sales for the first time ever, despite facing a higher tariff rate. Chinese EVs have the advantage of being cheaper: BYD’s Qin L costs roughly half as much as Tesla’s Model 3. Over the weekend, BYD slashed prices even further, sending shares of its Chinese EV competitors tumbling, and triggering government involvement.
Tesla’s path forward may hinge on the EV-maker entering a whole new AI arena, argued Ives, who has a $500 price target on the stock. (Keep in mind, the average analyst price target is $308, about% lower than where shares trade today).
“We believe the vast majority of valuation upside looking ahead for Tesla is centered around the success of its autonomous vision taking hold, with a key June launch in Austin the beginning of this next era of growth for Musk and Tesla,” he wrote. “We believe Tesla remains the most undervalued AI play in the market today.”
Surprise, surprise: All roads lead to AI.—LB