On Thursday, Tesla’s share price dropped over 40% from its peak, entering bear market territory, leading to heightened interest in the company.
The US National Highway Traffic Safety Administration recalled 46,000 Cybertrucks due to a safety issue involving detachable exterior panels. Additionally, Edmunds reported that record levels of Tesla vehicle trade-ins have occurred since CEO Musk joined the Trump administration.
JP Morgan noted the highest dollar inflows into Tesla shares by retail investors in over a decade, amounting to around US$7.3 billion across 12 consecutive sessions. Meanwhile, Morgan Stanley reduced its Tesla price target from US$430 to US$410.
Impact Of Stock Decline
What this means is clear. Tesla’s stock has dropped substantially from its high point, officially crossing into what is considered a bear market. The reason behind this is not singular but rather a combination of multiple ongoing factors, including safety recalls and consumer sentiment shifts. When a company of this magnitude faces such developments, institutional and retail traders tend to respond quickly, causing pronounced fluctuations in market activity.
Regulators demanded the recall of tens of thousands of Cybertrucks due to an exterior panel issue, which is more than just a procedural matter. Safety-related recalls can weigh on consumer confidence, and investors often react sharply when uncertainty emerges around product reliability. Safety concerns are never viewed in isolation—previous patterns suggest that heightened scrutiny can lead to delays in production schedules or increases in costs. None of these aspects are particularly favourable for stock performance in the short term.
Adding to this, recent data from Edmunds shows sharp growth in the number of Tesla owners choosing to trade in their vehicles. Correlations between trade-in volumes and shifts in consumer loyalty are meaningful. While the precise motivations behind these transactions may vary, high trade-in rates typically do not indicate strengthening sentiment for a brand’s long-term outlook. These numbers coincide with a period in which Musk’s associations with political figures have become more apparent, making it difficult to separate financial market reactions from broader public perception shifts.
Despite these challenges, one group of investors is doing the opposite of what might be expected in a period of uncertainty. Retail traders have been consistently buying Tesla shares. JP Morgan’s figures put this at US$7.3 billion in total retail inflows through 12 consecutive trading sessions, marking the largest such amount in over a decade. This shows that a segment of the market, likely composed of traders looking for discounted entry points, views the current downturn as an opportunity rather than a reason for concern. Historically, behaviour of this nature has been seen in other high-profile stocks when enthusiasm around a brand or company outweighs immediate fundamental concerns. However, while retail positioning is an indicator worth tracking, it does not always align fully with longer-term movements.
Analyst Reactions And Market Outlook
Meanwhile, Morgan Stanley took a different position. Reducing a price target from US$430 to US$410 may not appear drastic at first glance, but when leading investment firms adjust valuations, it signals a reassessment of expectations. Price targets incorporate extensive forecasting, taking into account everything from expected sales figures to macroeconomic conditions. Lowering such a target suggests a recalibration of growth projections, whether due to margins, demand, or overall sector conditions. For those navigating this market at a detailed level, this adjustment should not be taken lightly.
With these details in focus, upcoming weeks require adaptability. Corporate developments, analyst revisions, and shifts in investor sentiment are all pointing toward a market that is anything but stable.
