TSLA stock dropped 22% in 32 hours from $369.70 on June 4 to $284.70 by the close of June 5, 2025, following escalating public feud between Elon Musk and President Donald Trump with Trump threatening to terminate Tesla’s government subsidies and contracts, including the $7,500 EV tax credit citing Musk’s opposition to his “big, beautiful bill.”
There is also plummeting sales and brand damage from Musk’s politics. The problem is that Tesla’s market cap is twice as big as Toyota’s while its revenue is ten times smaller. The market is forward looking, and since we rely on reason when it comes to Tesla, we need to look at other tools that take emotion into account.
That’s where Elliot wave comes in.
The chart above shows that the selloff from the high of $368 unfolded in three-waves. Already we have seen an impulse to the upside in five-waves which is a wave 1 terminating at $368. Following the Elliot wave principle, after a five-wave impulse is a three-wave correction. So, we expect that the wave from $368 is the wave 2 of the impulse. If this count is correct, then the wave 2 should end around the 618% of wave 1.
Tesla’s net income peaked at $14.999 billion in 2023 but fell to $7.13 billion in 2024 and $6.107 billion TTM ending March 2025, reflecting competitive pressures and price cuts. Its P/E ratio of 162.7x is significantly higher than the automotive industry average (17.27x) and tech peers (30–40x), driven by AI and robotaxi expectations but signaling overvaluation.
We are EWNation are big fans of Elon Musk and everything he does, our target of ($350–$515) and DCF models indicate potential undervaluation for long-term investors betting on autonomous driving, AI and energy growth.
An alternate count seeks a deeper retracement, in the situation of additional fallout from the Trump feud, then it is possible for TSLA stock to plummet further down. In any case, price is not expected to void the $221.5 low.
In our Elliot Wave Premium subscriptions we provide analyses of Stocks, Cryptocurrencies and forex. Check them out now!
