Tesla Shares Experience Significant Drop Following Post-Election Surge

A Tesla Cybertruck is parked outside of a dealership on November 14, 2024, in Austin, Texas.

Tesla shares fell by over 8% on Wednesday, marking their largest decline since prior to Donald Trump's election victory last month, which had led to a significant increase in the stock's value.

The stock closed at $440.13, still reflecting a remarkable 75% increase since Election Day on November 5. Just last week, the shares had hit a record high of $479.86, surpassing the previous peak from 2021.

Analysts from Barclays noted that many investors are shocked by the size of the rally, expressing confusion about how to approach the stock given its apparent disconnection from fundamental business performance. They currently advise a hold position on the stock with a price target of $270.

The recent pullback in Tesla's shares occurred alongside a broader market downturn, with the Nasdaq index dropping by 3.6%, marking its second-worst trading day of the year.

In November alone, Tesla stock soared by 38%, marking its best monthly performance since January 2023 and the tenth-best in its history. Elon Musk, Tesla's CEO and a known supporter of Trump, significantly contributed to Trump's campaign, investing $277 million primarily in this effort.

Musk is poised to take a role within the Trump administration as the head of the "Department of Government Efficiency," an advisory office where he will work alongside former presidential candidate Vivek Ramaswamy. This position may provide Musk with some influence over public agency budgets and regulations. He previously mentioned during a Tesla earnings call that he plans to advocate for a federal approval process for autonomous vehicles.

Despite Tesla's current absence of robotaxis or autonomous ride-hailing services, domestic competitor Waymo has reported over four million paid robotaxi trips this year as it expands its commercial operations.

The analysts at Barclays highlighted that Tesla serves as a proxy for investing in Musk himself, which has amplified the risk tied to Musk's involvement in the company.

A recent Quinnipiac poll revealed that 53% of U.S. voters disapprove of Musk's prominent role in Trump's administration. This sentiment shows significant division, as only 31% of women and 5% of Democrats surveyed expressed approval.

Additionally, Musk has raised concerns over the SEC's issuance of a "settlement demand" relating to his sale of Tesla shares in 2022 while he was acquiring Twitter, now known as X. An SEC spokesperson has not commented on the specifics, citing the need for confidentiality in ongoing investigations.

Tesla is expected to release its fourth-quarter and full-year vehicle delivery figures in January. To boost sales, the company is offering various incentives, including 0% financing, since it hasn't added a major new vehicle to its lineup since starting Cybertruck deliveries in November 2023.

WATCH: Analyst discusses the momentum of Tesla stock.

Tesla, Musk, Shares