Why Tesla Stock Is Sinking Today

Key Points

• William Blair lowered its rating on Tesla stock from outperform to market perform today.

• The Wall Street Journal recently reported that Tesla is losing market share in China, and President Trump threatened new tariffs.

• CEO Elon Musk announced his new political party over the weekend, and investors don't seem to be happy with the news.

Tesla (NASDAQ: TSLA) stock is moving lower in Monday's trading due to a combination of bearish factors. The company's share price was down 7.1% as of 11:30 a.m. ET amid a 0.6% decline for the S&P 500 and a 0.7% decline for the Nasdaq Composite.

Tesla stock is moving lower today as investors react to a downgrade from an analyst, competition from Chinese companies, and the latest developments on the trade war. News that CEO Elon Musk is launching his own political party also appears to be weighing on the stock.

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Tesla stock slips following analyst downgrade and other catalysts

In a note published before the market opened this morning, William Blair lowered its rating on Tesla stock from outperform to market perform. Jed Dorsheimer, the firm's lead analyst on the stock, cited controversies surrounding Elon Musk and the removal of tax credits following the recently passed budget bill as challenges for the electric vehicle company. Dorsheimer expects that softer demand due to the removal of tax credits and the potential to lose roughly $2 billion in profits from regulatory credits could hurt the stock.

Adding further pressure to Tesla's valuation today, The Wall Street Journal published a report yesterday stating that Tesla is losing share in the Chinese market as customers shift toward domestic autos. President Trump also said today that he is considering an additional 10% tariff on goods from countries that align themselves with "Anti-American" moves from the BRICS countries -- Brazil, Russia, India, China, and South Africa.

Will Musk's political moves create more challenges for Tesla stock?

Over the weekend, Elon Musk said that he had formed a new political party. Musk indicated that his newly formed American Party could potentially endorse a candidate for president, but he said that its focus over the next year would be the U.S. Congress. The CEO's political activities have been a significant source of volatility for Tesla stock over the last year, and there are some indications that they have done long-term damage to the brand. With very little information about Musk's American Party currently available, it's difficult to assess what impact it might have on Tesla's valuation -- but investors don't appear to be thrilled with the development.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.