Tesla (NASDAQ:TSLA) stock has declined comtinuously over the past month with very few positive days. The stock is down nearly 36% since mid-February and has gapped down even more today.

Many are considering buying the dip on this stock. But before you do, let’s take a look at whether or not this is truly a “dip” worth buying into.

Is This Really a Discount?
TSLA stock has declined significantly from its recent peak, but that peak was mostly due to a wave of hype after Donald Trump was elected. Elon Musk’s involvement was seen as a bullish thing not only for Tesla, but for the broader economy and many Tesla investors thought this could bring about a boom for the company as Musk gains sway in D.C.

The recent decline in TSLA is more of a reversion to the mean from that Trump bump. The broader market is doing much worse, so Tesla has actually fared better if you zoom out. Its 1-year gains are comparable to that of Nvidia (NASDAQ:NVDA).

Musk’s involvement in the Trump administration does warrant a premium for the stock, but I’d argue that is outweighed by the tariffs and broader economic softness. Austerity is not going to drive up demand for Tesla, nor will the politicization of the company. In fact, many are seeing Musk’s involvement as a bad thing as he’s now more focused on DOGE.

As such, I wouldn’t consider the stock’s decline a discount. Could it be oversold in the short term? Sure, but it can go a lot lower.

How Low Can TSLA Stock Go?

Tesla can still fall significantly from here as it is now fundamentally weak. The company reported 2.15% revenue growth in Q1 2025 and missed estimates by 5.25%. EPS also missed, with massive earnings compression. Net income declined 70.77% to $2.32 billion. The bottom line may bounce back, but I believe it will stay compressed for a long time, especially if Trump pulls back EV subsidies.

Sales are declining worldwide. China-made EVs dropped by 50%, compared to a 90% increase for BYD. Germany and Australia sales declined by over 70% year-over-year, and even U.S. registrations are now falling. On top of that, Tesla’s vehicles are now politicized enough for a good 50% of the U.S. population to reconsider buying one. And this is the segment of the population that historically has bought the most Teslas. The average Republican folk is not that interested in a fully-electric car.

You’re still paying 87 times forward earnings and almost 7 times forward sales for a company with worsening metrics. That’s too expensive, and TSLA could fall another 50% from here in the worst-case scenario. That aligns with Bernstein’s price target last year.

Should You Sell TSLA Stock Now?
A 50% downside from here is unlikely if the market recovers, but I still see more downside risk for Tesla stock due to the weakening fundamentals. Historically, Wall Street has paid about a 100x TTM earnings multiple for the stock. It currently trades at 112x TTM earnings, but this doesn’t account for the massive growth slowdown, nor does it account for the Q4 earnings miss across the board.

All things considered, I’d sell the dip on TSLA stock. I do not think it can meet its targets for the current year. Musk’s political power won’t land Tesla new customers, especially if he’s distracted by DOGE. Even if you’re a TSLA bull, I’d wait for it to break below $200 to buy.

— Omor Ibne Ehsan

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Source: Money Morning