Tesla is struggling. One Wall Street analyst sees Red state EV buyers coming to the rescue.
Andrew Harnik/Getty Images; LIONEL BONAVENTURE/AFP via Getty Images; Chelsea Jia Feng/BI
- Tesla's stock sell-off in 2025 has been partly blamed on Elon Musk's divisive politics.
- But TD Cowen says Musk's new political career could help Tesla grow in new US markets.
- "Tesla could actually net meaningful sales gains over time," analyst said.
As Tesla investors weather a barrage of bad headlines, Elon Musk's new political clout might actually end up proving to be an asset to the company, analysts at TD Cowen said this week.
That might not seem obvious right now. The CEO is at the helm of a company besieged by a flurry of headwinds. Depressed sales data, Wall Street downgrades, and rising EV competition have tanked shares by over 50% since December.
Meanwhile, Musk has fallen into hot water among investors and consumers alike, as his role in the Trump administration is creating a political divide around the Tesla brand.
But that could boost business down the road.
"What such concerns seemingly overlook is that under scenarios whereby Tesla were to lose share in Blue counties but gain in Red, Tesla could actually net meaningful sales gains over time," TD Cowen analysts Itay Michaeli wrote Tuesday.
The firm maintained its buy rating on the stock and a price target of $388 per share.
A brand remake
Over the years, Tesla's reputation as an EV leader made it popular with buyers in liberal-leaning regions. However, with Musk rising as. a right-wing star during the 2024 presidential campaign, Tesla's brand is eroding in its traditional "strongholds," Michaeli said.
In the most extreme scenarios, this has manifested in Tesla boycotts and instances of vandalism.
Yet, there are signs of a pick-up in Republican regions. Michaeli said that modeling the trend out into the future shows that this could help buoy Tesla's business.
"To be sure, if this were to play out, headwinds would likely materialize before tailwinds, so this isn't a call on [near-term] demand (expect a tough Q1). Rather, our analysis suggests that over a multi-year period, Tesla's growth in under-penetrated EV regions could overcome losses in current strongholds," he wrote.
Under TD's base case, Tesla's permanent sales will decline by 22%-28% in Blue counties, amounting to 105,000 lost units. But EV adoption would rise to 9.7% in Red regions, gaining Tesla 107,000 units.
This is also a net positive for the company's competitors. In this scenario, rivals such as GM, Hyundai, Ford, and Honda would fill the demand gap left behind by Tesla.
Upgrades, downgrades
Michaeli's upbeat take stands apart from a wave of downgrades on Wall Street.
Recently, RBC and JPMorgan have slashed price targets on Tesla, with the latter pointing to Musk's politics.
"Mr. Musk's work with the Department of Government Efficiency has proven controversial domestically, and while as many members of the political right may be pleased as those on the left are displeased, the effect on Tesla sales seems nevertheless negative," JPMorgan analysts wrote.
However, Cantor Fitzgerald upgraded the stock to "overweight" on Wednesday, maintaining a $425 price target. Tech developments underline the firm's bullishness amid high expectations for Tesla's robotaxis and Optimus bot.