Dan Ives is the global head of technology research at Wedbush Securities, and he is consistently one of the most bullish voices on Wall Street when it comes to America's most innovative companies. He had a $550 price target on Tesla (TSLA -5.71%) stock up until earlier this week, when he slashed it by 43% to just $315.
Although Ives has previously said Tesla's full self-driving (FSD) platform could be a $1 trillion opportunity for the company, he's worried about the potential damage CEO Elon Musk might have inflicted on the brand due to his ongoing role in politics.
It might be showing up in Tesla's numbers, because the company's electric vehicle (EV) sales plummeted in the first quarter of 2025. Tesla stock has declined by 49% from its recent all-time high, so the weak EV sales are starting to get priced in. However, the stock remains expensive, so here's why it's possible Ives didn't cut his price target enough.
Image source: Tesla.
Tesla is losing potential customers
Tesla delivered 1.79 million cars during 2024, which was a 1% decline compared to 2023. It was the first time the company's sales shrank on an annual basis since it launched its flagship Model S in 2011, so concerns were already swirling among investors.
However, the alarm bells grew louder when Tesla announced just 336,681 EV deliveries for the first quarter of 2025, which was a 13% decline from the year-ago period. Sales shrank in most European countries despite EV adoption growing overall, which suggests consumers are simply choosing other brands instead.
Ives thinks Tesla has already lost 10% of its future customer base worldwide solely because of Musk's political endeavors, and he says that's a "conservative" estimate. Musk is currently the head of the Department of Government Efficiency (DOGE), a White House project focused on bringing down the national debt by reducing wasteful spending. He has overseen thousands of federal layoffs so far, and the dismantling of entire agencies like the U.S. Agency for International Development (USAID).
People have retaliated by staging protests at Tesla dealerships around the world, many of which have resulted in significant physical damage. There have even been reports of private Tesla owners receiving abuse on the road, and ultimately, these incidents are likely forcing consumers to think twice before buying a Tesla, which doesn't bode well for future sales.
To make matters worse, Ives also thinks the import tariffs recently announced by President Donald Trump will hurt Tesla's business. Although the company manufactures EVs inside the U.S., it sources many expensive components (like batteries) from other countries like China, which will drive up its costs. This could be extremely damaging because Tesla is already being undercut on price by Chinese manufacturers like BYD and Great Wall, which both sell entry-level EVs for under $15,000 in their domestic markets, and are quickly expanding into other regions like Europe.
Full self-driving could power Tesla's next growth phase
Musk believes the future of mobility is autonomous. Tesla launched a robotaxi last year called the Cybercab, which will run entirely on the company's FSD software. Consumers will be able to hail a Cybercab using their smartphone and enjoy a fully autonomous ride to their destination. It will be a very similar experience to using Uber, except without a human driver.
Unsupervised FSD doesn't have regulatory approval anywhere in the U.S. yet, but Musk is hopeful it could be active in California and Texas sometime this year. Any delays could have serious consequences, because the Cybercab is already falling behind the competition. Waymo, which is owned by Alphabet, is already completing over 200,000 paid autonomous trips every single week through its own ride-hailing network, and through its partnership with Uber.
As I mentioned at the top, Dan Ives predicts autonomous vehicles will be a $1 trillion opportunity for Tesla over the long term. He isn't alone, because Cathie Wood's Ark Investment Management thinks new industries like autonomous ride-hailing could catapult Tesla's valuation to a whopping $8 trillion as soon as 2029. I think that forecast is ambitious, because it relies on the Cybercab generating $756 billion in annual revenue by then, which is 7 times as much money as Tesla brought in from selling EVs last year.
Nevertheless, it's clear this could eventually become one of Tesla's most valuable opportunities in the long run.
NASDAQ: TSLA
Key Data Points
Tesla stock could face more downside in the near term
According to Tesla's own forecast, the Cybercab won't enter mass production until sometime in 2026. As a result, the fate of the company's financial results will rest on its EV sales for at least the next year or two.
Unfortunately, a continued decline in sales could have dire consequences. Last year, the company slashed prices to increase demand, which ate into its profit margins. Since EV sales still declined, Tesla's earnings per share (EPS) wound up plunging by a whopping 53% to $2.04. That places its stock at an eye-popping price-to-earnings (P/E) ratio of 122.2, which is almost 6 times higher than the 21.8 P/E ratio of the S&P 500 (^GSPC -2.36%) index.
Since the EV sales decline accelerated in the first quarter of 2025, Tesla could be facing an even steeper drop in its EPS this year, which makes the stock appear even more expensive. As a result, the idea that Tesla stock could rise by 26% to reach Ives' price target of $315 over the next 12 months doesn't seem to jibe with the reality of the company's present situation.
There is every chance that FSD, the Cybercab, and other products like the Optimus humanoid robot transform Tesla over the long term, but paying such a steep premium for the stock today could open investors up to significant risks. If the EV business continues to struggle this year, it's possible the stock declines even further to trade at a more reasonable P/E ratio.
