How the Trump-Musk feud exposed the risk of the 'Musk premium' in Tesla's stock
Tesla (TSLA) CEO Elon Musk's recent feud with his former ally President Trump put the spotlight on the risk of the electric vehicle stock's "Musk premium."
Wall Street analysts and investors have varying opinions of Tesla and its controversial chief executive. But they agree on this: Tesla stock trades at higher levels than other electric vehicle companies. In other words, it trades at a premium because of Elon Musk.
"[I]f Elon Musk was gone tomorrow, [the] stock could get cut in half," Roth Capital Partners analyst Craig Irwin told Yahoo Finance. "There's no question there's a Musk premium in the shares." Irwin holds a Buy rating on Tesla stock.
Others have different values for the Musk premium. Tesla investor Justus Parmar, who runs venture capital firm Fortuna Investments and is pro-Musk, thinks it's closer to 10%. He added: "Tesla is one of the most volatile stocks on the entire planet ... It almost trades like a meme coin at times."
Hedgeye Risk Management analyst Jay Van Sciver, who holds a short position on the stock and is critical of Musk, thinks the premium is much higher.
"Tesla has this enormous stock market premium," Van Sciver said. "You would lose that tech premium from Tesla if Musk went away because he is seen as this genius entrepreneur who makes it all work."
"The reality is [Tesla's] revenue comes from selling cars and car services," Van Sciver explained. "If it were valued like a car company, shares would be 80%, 90% lower." Tesla reported deliveries falling in 2024 for the first time in over a decade.
Musk's string of controversies — from allegations of intense drug use to his apparent use of the Nazi salute — does little to sway dedicated investors. "What you're signing up for is you've got a very charismatic, very brilliant CEO," Parmar said.
But Musk's foray into politics, particularly his recent feud with President Trump, showcased how quickly the premium on Tesla shares can erode. Last week, Musk called for Trump's impeachment and accused the president of being "in the Epstein files," referring to convicted sex trafficker Jeffrey Epstein.
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