If you're going anywhere near Tesla (TSLA) , watch out for the falling knife.
The company has been hitting some rough patches as the electric vehicle maker looks to shift from auto-making to focus on self-driving technologies, energy storage and robotics.
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Tesla's core EV business has suffered from high interest rates and lagging demand, with last year's vehicle deliveries falling for the first time on record and profit margins narrowing because of price cuts and financing incentives.
In January, the company posted disappointing fourth-quarter results. and shares are down 15% from the start of the year.
Stephen Guilfoyle gave a blunt assessment of Tesla's current situation in his recent TheStreet Pro column.
"We've got a falling knife," the veteran trader declared. "I speak of former Wall Street darling, electric vehicle manufacturer, Tesla. The stock has fallen out of bed."
Guilfoyle, whose career dates back to the New York Stock Exchange floor in the 1980s, said Tesla's earnings were sloppy. Yet, that's not the whole story. Guilfoyle is also considering an interesting tack with Tesla shares.
His opinion may be worth considering, given that he correctly picked Palantir stock as his favorite to own in 2024 (and more recently, again in 2025).
Tesla CEO says it's essential to cut expenses
"Tesla suffered negative sales growth back in the second quarter and has not even sniffed 10% sales growth since Q2 2023," he said. "So, is Tesla a growth stock? The short answer is 'no'. The long answer is 'not anymore.'
CEO Elon Musk has been very busy lately as he and his Department of Government Efficiency (DOGE) look to overhaul the federal government.
The world's richest man, who also owns the rocket company SpaceX, appeared in the Oval Office with President Donald Trump on Feb. 11 to defend efforts to cut government spending.
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“It's not optional to reduce federal expenses, it's essential,” said Musk, who brought along four-year-old his son X, according to USA Today, adding that the federal bureaucracy was an “unelected, fourth, unconstitutional branch of government” that must be held accountable.
Sitting behind the Resolute Desk, Trump signed an executive order intended to significantly reduce the size of the government by instructing heads of federal departments and agencies to undertake plans for “large-scale reductions in force.”
Democrats have criticized DOGE for what they say is a lack of transparency, and the agency has been the target of legal challenges.
Musk, who has been butting heads with the judiciary in his bull-DOGE-ing efforts, posted a poll on X, formerly Twitter, which he bought for $44 billion in 2022.
"Federal judges who repeatedly abuse their authority to obstruct the will of the people via their elected representatives should be impeached," he wrote.
And then there was that business with OpenAI, where Musk made an unsolicited $97.4 billion bid for the nonprofit, saying he wanted to return OpenAI, which is now backed by Microsoft (MSFT) , to “the open-source, safety-focused force for good it once was."
Musk co-founded OpenAI with the company’s founder, Sam Altman, in 2015. The bid was reportedly backed in part by Musk's own xAI startup, which he would merge with OpenAI if a deal were to be completed.
Altman rejected the offer, saying, "No, thank you, but we will buy Twitter for $9.74 billion if you want."
Analysts at Oppenheimer said that while Tesla has shifted focus to being a physical artificial intelligence play, Musk's bid for OpenAI is a distraction from the company's challenges.
Wall Street veteran says the cult is no longer behind Tesla
The firm said that it sees increasing risks to Wall Street’s estimates for Tesla as electric vehicle and autonomous vehicle competition intensifies.
Musk spent at least $277 million to put Trump back in the White House. Oppenheimer believes his political activity “risks alienating consumers and employees as the Trump administration tests the limits of its power.”
Related: Analyst resets Tesla stock forecast as Musk targets OpenAI
The firm, which kept a perform rating on Tesla shares, said the negative trends in California and European electric vehicle registrations in 2024 continued in January. while China data suggests a soft start to the year.
Guilfoyle acknowledged that the "the cult" is no longer behind Tesla.
"As Musk has become a political figure, it would appear that his chosen political side and the chosen political side of those people most likely to purchase or lease an electric vehicle might not be the same side," he said.
Some Tesla owners have been expressing their anger at Musk's political leanings on Reddit, and he didn't help matters any by making a controversial hand gesture that drew comparisons to the Nazi salute.
Musk has denied any such intentions.
Guilfoyle added that he didn't believe Tesla's results had anything to do with Musk being focused elsewhere.
"While Musk is serving his country doing the work in finding abuse and incompetence in federal spending at a level that I don't think any of us could have comprehended prior, and work that should have been tackled years ago, his focus has to be spread rather thin," he said.
He added that Musk's work "is beyond incredible and beyond the abilities of almost anyone I know."
"I was a U.S. Marine and worked on Wall Street for several decades," the Sarge said. "Capable people are really all I have known. This guy's on his own level. Still, everyone is human."
Guilfoyle suggested that perhaps SpaceX or the startup is also taking on a higher priority than the car company or the social media platform.
"That's not something I've heard anywhere, it's just something I've wondered," he said.
Analyst sizes up buying Tesla stock despite challenges
Looking at the numbers, Guilfoyle said, "Operating and free cash flows are still quite beastly for Tesla, and the balance sheet is a work of art."
"There is good reason to invest in Tesla as long as one understands that they are not investing in growth, and that the CEO's brain may at times move on to other priorities," he said.
Benchmark analyst Mickey Legg had a favorable view of Tesla as he initiated coverage of the company with a buy rating and a $475 price target.
In addition to the continued proliferation of the electric vehicle market, Tesla has multiple opportunities to fuel growth, including autonomous vehicles, robotics, and energy generation/storage, he said.
Legg sees the release of more affordable Tesla models in 2025 as "a key catalyst for the stock," adding that its model has only baked in vehicle growth, "providing significant potential upside should autonomous vehicles and Optimus achieve scale," referring to the company's robotic humanoid.
Guilfoyle said he intended to take on a small, long position on Tesla.
"We are playing with a falling knife here, so even though this is Tesla, this is still speculative," he said. "Appropriate sizing and respect for panic points are paramount, but fear should not be part of the equation."
Related: Veteran fund manager issues dire S&P 500 warning for 2025
