Can Tesla Weather the Storm?

Zacks Rank #4 (Sell) stock Tesla (TSLA) is the leading EV-maker worldwide. However, recently, as Tesla attempts to enter new businesses and diversify from its core business, its legacy business has seen growth slow significantly amid political backlash, a slowing EV market, more competition, and an uncertain macroeconomic environment. Between the “Top Gear” Roadster review controversy, the Global Financial Crisis of 2008, and the COVID-19 pandemic, Tesla and its eccentric CEO Elon Musk have been through tough times before and made it out to the other side on top. Nevertheless, Musk and Tesla have their backs against the wall once again heading into earnings tomorrow.

With Tesla shares already down about 40% year-to-date, investors will be closely watching Tuesday night’s earnings call. That said, be sure to have a stomach for volatility if you want to play earnings, as the options market implies about a 9% move after the earnings are released.  Below are key questions that investors will be looking to get answered Tuesday.

1. Tariffs Impact: What Tesla is Doing to Mitigate?

Though Elon Musk has become one of the most outspoken Trump supporters and a de facto member of the administration, he is one of the most negatively impacted by the administration’s ever-evolving tariff policy. While Tesla manufactures many of its vehicles in the United States, it relies heavily on imports and the global supply chain for parts. In addition, raw materials like lithium and cobalt are necessary ingredients for battery production and must be sourced from countries like Canada.

2. DOGE Political Fallout: When Will Musk Return to TSLA?

Until recently, electric vehicles were mainly a staple for those on the left side of the political aisle. However, that narrative has been flipped on its head after President Donald Trump tapped Elon Musk to run the “Department of Government Efficiency” (DOGE). Since then, Musk has faced significant backlash from Democrats, including boycotts and vandalism. To make matters worse, most of Musk’s already limited time has been spent on DOGE, not Tesla. The last time Musk took time away from Tesla was when he purchased Twitter. At that time, investors reacted negatively and sold shares. In tomorrow’s earnings call it will be critical that Elon Musk gives an exact return date to Tesla. Should he not, investors are likely to react negatively.

3. Will the Robotaxi Launch on Time?

Elon Musk is known for his ambitious and aggressive timelines. While Musk often succeeds in the long term, he is not known for his punctuality. Currently, Tesla plans to roll out its first autonomous “Robotaxi” program in Austin, Texas, this summer. However, many investors are skeptical because Trump’s tariffs impact parts needed for Musk’s Cybercab. In the meantime, Alphabet’s (GOOGL) Waymo robotaxi service is off to a significant lead in the race for autonomous taxi service. Waymo already operates in four major cities and is expected to roll out five more cities in the near future. Failure of Tesla to confirm its autonomous ride-hailing service timeline will likely put more pressure on the stock.

Bottom Line

As the market braces for Tesla’s earnings report, the confluence of tariff pressures, political headwinds, and uncertainty surrounding the Robotaxi launch create a formidable challenge for the EV giant. While Tesla has demonstrated resilience in the face of past crises, the current multifaceted storm presents a unique test of its ability to navigate a complex and evolving landscape.

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This article originally published on Zacks Investment Research (zacks.com).

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