Electric vehicle (EV) king Tesla (TSLA) staged a late 2024 rally as CEO Elon Musk solidified himself as one of President Donald Trump’s key allies, securing a leadership role in the newly created Department of Government Efficiency. While the company may have kicked off 2025 on uncertain footing, with disappointing Q4 deliveries and uninspiring quarterly earnings results shaking investor confidence, hopes of a business-friendly regulatory landscape have kept bullish bets alive.

With the prospect of reduced oversight and pro-business policies on the horizon, many investors are still wagering that Tesla could emerge as one of the biggest corporate beneficiaries of the new political climate. However, Musk’s deepening involvement in politics is now proving to be a double-edged sword, casting a shadow over Tesla’s European dominance. The EV stock appears to be struggling once again as the company is facing a sharp decline in market share across Sweden and Norway, as fresh January car registration data paints a concerning picture.

Registrations plunged a notable 44% year-over-year in Sweden and tumbled 38% in Norway, despite both nations experiencing a surge in overall auto demand. Even though Tesla’s Model Y crossover SUV reigned as the Nordic region’s top-selling car throughout 2024, the company’s brand perception has taken a noticeable hit lately, as per a market sentiment survey by Sweden’s Novus Group. This underscores the shifting tides as European consumers grow increasingly wary of Musk’s political entanglements, threatening to erode Tesla’s foothold in one of its most crucial international markets.

Musk’s polarizing political stance, which has drawn criticism from European leaders, including Norway’s prime minister and Germany’s chancellor, appears to be eroding the once-loyal European customer base. The billionaire, who also runs social media platform X, has brushed off these backlashes as attacks on free speech and democracy. So, with Tesla navigating a complex political and consumer landscape, should investors sell the stock amid its European struggles, or is this an opportunity to buy the dip? Let’s take a closer look to find out.

About Tesla Stock

While Texas-based Tesla (TSLA) has solidified its dominance in the U.S. EV market, its vision extends far beyond the road. From revolutionizing energy storage to pioneering automation and robotics, the company is at the forefront of multiple high-growth industries. Since its public debut in 2010, Tesla has expanded at a breathtaking pace, amassing a $1.2 trillion market cap, surpassing the combined worth of some legacy automakers that once ruled the industry.

Yet, Tesla has faced some turbulence lately, with a sharp 5.2% dip on Feb. 3, triggered by the concerning January car registration data. However, despite a significant pullback of nearly 22.6% from its December highs, Tesla’s stock is still up an astounding 102% over the past year, far outpacing the S&P 500 Index ($SPX), which gained just 22.6%. Moreover, in the last six months, Tesla has surged by 90.2%, leaving the SPX in the dust with a mere 16.9% return.

Despite its recent slump, TSLA continues to command a sky-high valuation, trading at an eye-popping 154.19 times forward earnings and 12.63 times sales. These multiples are not only significantly above the sector averages, but also far surpass Tesla’s own five-year averages, highlighting the premium investors are still willing to pay for the EV giant, even amid its recent struggles.

Digging Into Tesla’s Q4 Financial Performance

After disappointing investors with Q4 and fiscal 2024 vehicle delivery and production figures earlier in January, which failed to meet Wall Street’s expectations, Tesla followed up with a weaker-than-expected Q4 earnings report on Jan. 29. Total revenue rose by a modest 2% year-over-year, reaching $25.7 billion, well below the $27.1 billion analysts had forecast. Adjusted EPS of $0.73 showed a 3% annual improvement but still missed Wall Street’s target by about 4.8%.

Tesla’s latest earnings report highlights strong growth in some key areas, with energy generation and storage revenue surging a stunning 113% year-over-year and services revenue rising by a solid 31%. However, the company’s automotive division faced a setback, with revenue slipping 8% to $19.8 billion, down from $21.6 billion in the same quarter last year. On top of that, operating income took a sharp 23% annual hit, dropping to $1.6 billion, highlighting the challenges the EV maker is facing in its core business.

Tesla attributed the drop in automotive revenue to lower average selling prices across its popular Model 3, Model Y, Model S, and Model X vehicles. These price reductions are part of the company’s strategy to drive higher sales volumes, but they’ve clearly put a strain on revenue, revealing the tough balance between boosting demand and maintaining healthy profit margins.

While Tesla didn’t offer specific guidance for fiscal 2025, the company made a bold statement in its Q4 shareholder deck, declaring that “2025 will be a seminal year in Tesla’s history.” The EV maker highlighted the ongoing improvements in its Full Self-Driving (FSD) technology, with the ambitious goal of surpassing human levels of safety in the near future.

This progress is setting the stage for the introduction of an unsupervised FSD option for customers, with Tesla’s highly anticipated robotaxi service poised to launch later this year in select U.S. regions. Furthermore, the company is pushing forward with the expansion of its FSD (Supervised) rollout, bringing the cutting-edge technology to new markets in Europe and China in 2025.

What Do Analysts Expect for Tesla Stock?

Overall, Wall Street is taking a more cautious approach to TSLA stock, maintaining a consensus rating of “Hold.” Of the 38 analysts offering recommendations, 12 advise a “Strong Buy,” two suggest a “Moderate Buy,” 14 give a “Hold,” and the remaining 10 maintain a “Strong Sell.” Although TSLA has already soared beyond its average analyst price target of $338.52, the Street-high target of $550 signals that the stock can still rally as much as 45.4% from current levels.

Given Tesla’s recent struggles in Europe, along with disappointing earnings and delivery figures, investors should exercise caution for now. While the company’s long-term prospects might be strong with advancements in self-driving technology and potential regulatory benefits, the current turbulence in its key markets and political entanglements could weigh on its short-term performance. As Wall Street remains divided on the stock’s future, those looking to invest may want to wait for clearer signs of stability before committing, especially considering the stock’s recent volatility.