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Oppenheimer has warned that investor focus has shifted to consumer backlash over Musk's political activities and declining 2025 sales expectations.
Tesla shares have plunged over 50% from their all-time highs in December, with bearish traders convinced the bottom isn't in yet.
Initial optimism over regulatory easing under President Donald Trump has faded as investors increasingly see CEO Elon Musk's role in Washington's Department of Government Efficiency (DOGE) damaging Tesla's brand.
Adding to concerns, media reports highlight that top insiders have sold over $100 million in Tesla stock since early February. Those offloading shares include board chair Robyn Denholm, director James Murdoch, Musk's brother Kimbal, and CFO Vaibhav Taneja.
While some sales were preplanned, investors largely view them as bearish signals.
On Stocktwits, where Tesla is the most-followed stock with over a million watchers, sentiment has been stuck in 'bearish' territory for a month amid a 933% surge in message volume.
Posts have been polarizing, with several retail traders on the platform sharing strong opinions about Musk's right-wing tilt and his corrosive effect on the Tesla brand.
An ongoing poll on Tesla insiders' stock sales shows 32% of over 1,500 respondents see it as a "red flag," believing executives "know something we don't." Meanwhile, 23% say it's "just business," another 23% call it a "smart move" ahead of a further drop, and 22% think it's "bad optics."
Some users believe Tesla insiders are selling because they see firsthand how sales are "absolutely plummeting."
One watcher argued that no other brand is losing over 50% in key markets, and warned that Tesla's price-to-earnings ratio remains heavily inflated and that the stock has "a lot to fall in the coming days," especially as backlash against the brand grows.
Following news that several Tesla vehicles at a Las Vegas service center were set ablaze Tuesday morning, Musk labeled it as an act of "terrorism."
However, Tesla continues to advance its ambitions for AI and autonomous driving. On Tuesday, the company secured the first of several approvals from the California Public Utilities Commission to launch its robotaxi service in the state.
But that hardly lifted the stock. Oppenheimer has warned that investor focus has shifted to consumer backlash over Musk's political activities and declining 2025 sales expectations.
The research firm sees Tesla's next phase hinging on its ability to replace lost customers while making tangible progress in autonomy and AI.
While a more conservative customer base could emerge, Oppenheimer argues Tesla's product lineup and service network aren't well-suited for that demographic.
Tesla stock is down more than 42% this year, with the first quarter yet to close. Its worst annual performance came in 2022, when it tumbled 65%, according to Macrotrends. Shares were up 1.7% in early premarket trading on Wednesday.
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