Tesla stock (NASDAQ:TSLA) is experiencing a notable surge in midday trading on February 13, driven by rumors that the U.S. government is interested in purchasing $400 million worth of armored electric vehicles from the company. This speculation follows the appearance of “Armored Tesla (Production Units)” as a line item on the “Department of State Procurement Forecast 2025.” While the reference to Tesla has since been removed from the document, the rumor has sparked investor enthusiasm, lifting Tesla stock by more than 4%.

Speculation Sparks Interest in Tesla Stock

The appearance of the term “Armored Tesla” in the official government procurement forecast sent shockwaves through the market. However, this excitement was tempered by a statement from Tesla’s CEO, Elon Musk, who categorically denied any discussions with the U.S. government regarding a contract for armored electric vehicles. Additionally, a spokesperson for the U.S. State Department reinforced this, clarifying that there had been no formal proposal for such a contract.

Despite the rumors being debunked, Tesla stock has continued to benefit from the speculation, with TSLA shares still showing a positive movement. However, it’s important to note that Tesla’s recent performance has been mixed, with the company facing significant challenges in 2025.

Tesla’s Challenges in 2025

While the news about the armored EV contract caused a short-term rally in Tesla stock, the company continues to grapple with several ongoing difficulties. Tesla’s most recent earnings report, released on January 29, revealed a decline in automotive revenue, which fell by 8% year-over-year to $19.8 billion. Furthermore, Tesla’s operating margin slipped from 8.2% in Q4 of the previous year to 6.2% in Q4 of 2024, reflecting mounting pressure on the company’s bottom line.

Another key challenge for Tesla has been its annual delivery figures, which saw a decline for the first time ever in 2024. The rising competition from Chinese electric vehicle manufacturers, many of which offer more affordable options, has put additional pressure on Tesla’s market share and growth potential. With these factors combined, Tesla’s stock has faced considerable headwinds, making investors cautious about its long-term prospects.

Tesla Stock and Analyst Sentiment

As Tesla struggles to navigate these challenges, analysts have become more cautious in their outlook for TSLA. The consensus rating on the stock currently sits at “Hold,” reflecting investor uncertainty about Tesla’s ability to overcome the challenges it faces. The mean target price for TSLA is $338, suggesting a potential downside of approximately 4% from its current trading levels.

Despite the mixed sentiment, analysts still expect Tesla to grow its earnings by 24.51% in 2025, followed by a further uptick in earnings growth to 31.50% in 2026. This projection suggests that Tesla’s long-term growth potential remains intact, despite its current struggles.

What’s Next for Tesla Stock?

The recent surge in Tesla stock due to the rumors about a government contract has highlighted the volatility surrounding the EV maker. While the speculation may have been unfounded, it reflects broader investor interest in Tesla’s potential opportunities. However, with rising competition, declining deliveries, and margin pressure, Tesla’s stock faces a difficult road ahead.

Investors should keep an eye on the company’s upcoming earnings and any new developments in the EV market, particularly in relation to the competition from Chinese manufacturers. While Tesla has a strong brand and technological leadership, its stock performance in 2025 will largely depend on how well it can adapt to the changing market landscape.

In conclusion, while rumors may have momentarily boosted Tesla stock, the company’s real test will come in the months ahead as it looks to regain momentum in an increasingly competitive EV market.

Featured Image: Freepik

Please See Disclaimer