Formerly Optimistic Tesla Megainvestor: "Code Red"

Tesla is expected to report first-quarter earnings after markets close today.

And many investors are expecting a "messy" rollercoaster ride. The EV maker has seen its stock price fluctuate wildly amid president Donald Trump's tariff war, and is currently down over 37 percent year to date.

Sales have dropped off a cliff worldwide, with longtime Tesla megainvestor and Wedbush Securities analyst Dan Ives warning that CEO Elon Musk has created a "code red" situation for the once-ascendant company.

Musk has spearheaded the Trump administration's massive slashing of government budgets with the help of his so-called Department of Government Efficiency. His actions there, as well as his increasingly public and extremist views, have proven devastating for Tesla's brand.

Just two months ago, Ives raised his Tesla price target to a lofty $550, predicting a "golden era" for Musk with Trump in the White House. At the time, he expected that Tesla could see its market cap reach $2 trillion by the end of this year, arguing that the incoming Trump administration could be a "total game changer" for Tesla's self-driving and AI ventures.

Instead, Tesla stock price is down to a dismal $237 per share, with its market cap at just $740 billion — and investors are clearly concerned that, if Musk can't undo all the damage he's inflicted, it could fall much further.

Ives also predicted "very solid" delivery demand for the company's vehicles, which has instead cratered this quarter, even falling behind rival BYD as resale value for the besmirched vehicles falls as well.

Then, as bad news added up, he cut his target by a whopping 43 percent, saying that Musk's disastrous political scheming was driving the brand into the ground.

Ives also remains concerned the mercurial CEO has given up on the carmaker, considering the sheer amount of time he's been spending in Washington, DC.

"Musk needs to leave the government, take a major step back on DOGE, and get back to being CEO of Tesla full-time," Ives argued in a Sunday note to clients. "Tesla is Musk and Musk is Tesla... and anyone that thinks the brand damage Musk has inflicted is not a real thing, spend some time speaking to car buyers in the US, Europe, and Asia."

"You will think differently after those discussions," he added.

In the run-up to the company's earnings call, Tesla's share price has been volatile, sinking over six percent on Monday only to recover the lost ground by midday Tuesday.

And plenty of questions remain about the company's future. Musk has bet Tesla's fate on self-driving tech and the launch of a "Cybercab" robotaxi that's supposed to be revealed this summer.

However, investors have been far more concerned about the company refreshing its conventional lineup, which hasn't seen a major overhaul in quite some time now. So far, we've only heard rumors of a purportedly cheaper mass-market vehicle that's based on the company's popular Model Y SUV.

Given the grim outlook, Ives slashed his price target two weeks ago, pointing out concerns over Tesla getting caught up in Trump's trade war against China. While the EV maker has a strong manufacturing presence in the US, it isn't immune to the president's steep tariffs aimed at the world power.

The longtime Tesla bull predicted tough days ahead for the carmaker.

"We view this as a fork in the road time," Ives added, borrowing an expression Musk used to encourage federal government employees to resign. "If Musk leaves the White House there will be permanent brand damage, but Tesla will have its most important asset and strategic thinker back as full time CEO."

However, "if Musk chooses to stay with the Trump White House, it could change the future of Tesla/brand damage will grow," Ives argued.

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