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Key Takeaways
- Tesla stock rose on Friday after the Department of Transportation announced an Automated Vehicle Framework, which is intended to loosen up restrictions on self driving cars.
- Shares climbed 18% this week, the stock's best weekly performance since it soared in the wake of Donald Trump's election victory last November.
- Musk on Tuesday said he would soon be stepping back from his work with the Department of Government Efficiency, reassuring investors concerned it is affecting Tesla's brand and Musk's leadership.
Tesla (TSLA), the stock, posted its best week of trading since the November presidential election. Investors looked forward to a future where autonomous car regulations will be loosened and a CEO who is more focused.
Tesla shares rose nearly 10% on the Friday after the Department of Transportation released a Automated Vehicle Framework that aims to relax regulatory standards. The stock gained 18% last week, easily the best week in 2018. It was also its biggest weekly increase since it rose nearly 30% during the week Donald Trump won reelection.
Shares jumped more than 4% on Tuesday amid a broad rally in the stock market, fueled by optimism that Trump’s administration will lower the steep rates of tariffs it imposed this month. Musk assured investors Wednesday that he will spend less time as the head of President Trump’s Department of Government Efficiency starting in May. Investors worry that this position has both distracted Musk, and damaged Tesla’s reputation.
Musk’s decision refocus on Tesla offset the otherwise bleak quarter results. The electric car maker reported a decline of 20% in automotive revenue. Margins were also narrower, and adjusted earnings fell by nearly 40%. It also declined to provide full-year guidance due to the uncertainty surrounding tariffs as well as the overall economic outlook.
In the short term, the company will face a bumpy ride, as tariffs are expected to increase manufacturing costs and, if a recession occurs, reduce consumer spending. The company may also find it difficult to break its association with President Trump whose unpopularity overseas has contributed to a sharp decline in Tesla sales, even though total EV sales are on the rise.
After Tuesday’s disappointing results, analysts at several firms including JPMorgan, Bank of America and Morgan Stanley lowered their estimates of Tesla’s full-year earnings. Several analysts left their price targets the same, reflecting Wall Street’s confidence in Tesla’s ability to overcome short-term headwinds.
Musk has said Tesla’s value—he has forecast it will be “the most valuable company in the world and probably by a long shot”—has as much, if not more, to do with its development of AI, autonomous driving, and robotics than the electric vehicles that account for the bulk of its revenue today. Musk reiterated his ambitious timelines on Tuesday’s call for the rollouts of self-driving car, robotaxis, humanoid, and other robots.
