Tesla Stock About To Go Through A Death Cross As Elon Musk's Politics Ruin A Once Loved Brand
Tesla is within a few trading days from going through a Death Cross. The 50-day moving average is in a steep drop, and about to crash through the 200-day moving average. The fundamentals of the company are aligned with the correction trend as the company looks to be in a world of hurt.
Messaging is starting to come out that Elon Musk’s political career could be coming to an end, as it sounds like Trump and his team are starting to realize that Musk’s usefulness is waning.
There has been plenty of smoke and mirrors about what DOGE is finding, and I’m sure they have found plenty of waste, fraud and abuse, but his hands are tied about doing something about it.
Trump has been running the government by executive orders, but that leaves him open to court actions. Normal Washington business is to pass bills that make their way through the House and Senate for the president to sign into law. Governing by decree using executive orders leaves them at the mercy of judicial review.
Another potential nail in the coffin for Musk’s political career is the Wisconsin election for a key seat in the state’s supreme court. Musk campaigned and pumped a bunch of money into defeating Susan Crawford. His concern was that if Crawford wins the court will enable redistricting of congressional seats that could affect the balance of power in the 2026 midterm elections. Musk’s efforts to campaign for Crawford’s rival, and the money he spent, were an abject failure.
Tesla hit its record high on the euphoria after Trump’s landslide victory. But, since then, Musk’s DOGE efforts have spooked people on the left and right. His approval ratings have nosedived and it is causing massive problems for Tesla.
People are vandalizing Tesla cars and dealerships, which is crazy to me, but Musk has angered many lunatics. Others are boycotting Tesla in America and throughout the world, and others are protesting outside Tesla dealerships while consumers are on a buyer’s strike.
It is somewhat surprising how quickly a much loved brand can be punished so rapidly. Musk wanted to get into politics and his political actions are angering many. He is trying to impact politics outside of America, as well as inside of it, which is problematic for a car maker that sells cars all over the world.
Sure he still has plenty of MAGA fans, but they aren’t the demographic that buys a lot of electric vehicles, they love their gas powered cars. Meanwhile, his key demographic are more toward the center and to the left when it comes to politics. The chances that his MAGA fans can replace his key demographic are highly doubtful.
Musk’s politics are getting plenty of pushback from his key demographic in America and worldwide. Which has wounded the Tesla brand in a massive way. Leaving Washington to focus on fixing Tesla isn’t likely to work because he has alienated so many of his customers.
The Tesla brand enabled the stock to get a valuation that is higher than all other car makers combined. Even after its recent correction, it still has an extreme price to earnings ratio, and it looks like the earnings are in for a shock.
Not only are sales dropping, the cost of recalling the Cybertrucks is going to be expensive. Some of the speculation is that if he leaves Washington to run Tesla he will cut prices which will affect the profit margin.
A less well known fact about Tesla is that they make a lot of money from carbon credits they sell to car makers of gas powered vehicles. They have contracts to provide those carbon credits and if sales keep dropping, then this could quickly turn from an asset into a liability.
Tesla is one of the MAG 7 stocks that are also under pressure. I recently included in a report how most of them have had or are about to have Death Crosses. Tesla’s Death Cross looks to be the most severe.
Wall Street stocks and tech stocks are priced for perfection. But with Trump’s mass deportations and tariffs the economy is slowing and inflation is rising to the point that stagflation is a growing problem. This is certainly not a perfect economic scenario and makes the priced for perfection stocks risky.
Meanwhile, gold is in a tremendous bull market and enabling the gold miners to make money hand over fist. Take Agnico Eagle (one of the big 3 in gold mining) for example, they are producing gold at half the price of what they are selling it for which makes them a free cash flow machine.
With Wall Street stocks, MAG 7 stocks, tech stocks and Tesla at premium valuations, investors are buying them for high multiples to their earning per share.
Depending on what price you use for gold, Agnico Eagle is trading for around 20 times their free cash flow. Plenty of other gold miners are also growing their free cash flow in impressive fashion. Gold mining is quickly becoming one of the best industries to be in of all.
While gold miners are making money hand over fist, Tesla is trading at a price to earnings ratio in the triple digits. Even if the stock price drops as precipitously as I think is coming, the earnings could drop just as much and keep it having an extreme valuation even with a dramatic correction after the Death Cross.
I don’t make buying or selling recommendations, that is up to readers to do their homework and assess their risk profile with their financial advisors. What I am comfortable to say, with high conviction, is that being long gold miners like Agnico Eagle, while being short Tesla, is a much better bet than short Agnico Eagle and long Tesla.
If you would like to see my top picks for gold miners, you can find my recent report highlighting them here. I also have a new gold miner pick to report on soon. If you would like to receive all my written and video reports in your email, you can join my email list here.
All the best,
Allan Barry Laboucan
