Should You Buy the Panic in Tesla Stock, or Steer Clear?

Tesla (TSLA) is down big today, with its stock plummeting over 8% to $303.29, pushing the company's market value below $1 trillion in the process - and marking it as the weakest performer among the Magnificent 7 stocks in 2025. The company's European EV registrations showed a dramatic 45% decline in January 2025 compared to the previous year, dropping from 18,161 to 9,945 vehicles, despite overall European EV sales growing by 37% during the period.

Why is Tesla Stock Down?

CEO Elon Musk's political activities and involvement with the Trump administration appear to be creating substantial headwinds for the company, with analysts estimating these issues account for 10-15% of Tesla's current challenges. The company's brand value has deteriorated significantly, dropping 26% globally and falling from ninth to 36th place in global rankings. 

At the same time, Tesla is facing increasing competition from Chinese manufacturers - and particularly BYD (BYDDY), with U.S.-traded shares of that stock up by 47.8% so far in 2025, thanks to autonomous driving developments. Notably, BYD outsold Tesla in the U.K. last month for the first time ever.

Is Tesla Undervalued?

From a technical perspective, TSLA stock is now trading beneath its lower Bollinger Band, and the stock’s 14-day Relative Strength Index (RSI) is below 30. Taken together, this suggests that the shares are short-term oversold, and could be due for a bounce.

That said, Tesla still isn’t especially cheap at current levels, despite pulling back about 39% from its mid-December peak. The stock is priced at 116 times forward adjusted earnings, which would be expensive even for a pure growth artificial intelligence (AI) company - let alone an auto manufacturer with higher overhead costs.

Fundamental Challenges for Tesla

Additionally, internal challenges persist, including difficulties in attracting and retaining top talent. Tesla experienced a significant wave of executive departures over the past year, with multiple direct reports to CEO Musk leaving the company, particularly in late 2024. 

One of the most notable departures was Zheng Gao, Tesla's director of engineering for Autopilot hardware, who left to join Amazon (AMZN)-backed competitor Zoox. The exodus has been particularly concentrated around Tesla's autonomous vehicle (AV) initiatives, suggesting possible internal disagreements about the company's strategic direction. 

At the same time, the Cybertruck's underwhelming sales of less than 40,000 units in 2024 has led to Tesla scaling back production of the electric SUV. 

Is TSLA Stock a Buy, Hold, or Sell?

The charts indicate that now isn’t the best time to short Tesla, with the selling potentially overdone. However, investors should proceed with caution before buying this dip, given the stock’s stretched valuation and significant fundamental challenges.

Tracking that mixed view, Wall Street analysts maintain their typically split opinion on TSLA, which has an average rating of “Hold.” However, for once the shares are trading comfortably below their consensus price target from analysts, which - at $346.14 - denotes expected upside of about 15% from current levels.