Wells Fargo Downgrades Tesla to ‘Underweight’, Slashes Price Target to $125
Wells Fargo has downgraded Tesla to ‘Underweight’ and reduced the price target to $125, down from $200.
Wells Fargo analyst Colin Langan said Tesla is a “growth company with no growth
The analyst’s comment suggests potential challenges ahead, citing concerns about diminishing impact from price cuts, potential negative effects on volume, and the likelihood of adverse EPS revisions due to disappointing deliveries and further price reductions.
Tesla’s growth in key markets like the EU and China has slowed in the last twelve months, with the US experiencing a decline since Q2. Of greater concern is the diminishing impact of price cuts, as second-half volume increased by only 3% on a half-over-half basis, despite a 5% decrease in pricing.
Analyst Colin Langan anticipates stagnant volumes for 2024 and a decline in 2025. The aftermath of price cuts is expected to result in reduced lease residuals, dissatisfied customers, and a potential erosion of the luxury brand premium.
UBS on Tesla: UBS has revised Tesla’s price target downward to $165 from $225 while maintaining its ‘Neutral’ rating.
UBS has decreased its Q1 delivery forecast for Tesla to 432,000 from 466,000, indicating that its outlook is now approximately 10% lower than the consensus forecast of 477,000 units.
The company’s 2024 delivery forecast has been revised to 1.96 million units, down from the previous estimate of 2.02 million, representing a decrease of approximately 5% below the consensus.
Wedbush on Tesla: Wedbush maintained its positive outlook on Tesla by reaffirming its Outperform rating and adjusting the price target to $315. Despite a decrease from $350, the firm remains optimistic about Tesla’s long-term potential. Wedbush attributes the lowered target to challenges such as price cuts and a lack of guidance from Tesla’s management, likening these issues to a “Category 4 hurricane.”
Tesla’s stock appears to be overly pessimistic, with a stabilized demand outlook for 2024, moderating price cuts, cost efficiencies in battery production, and plans for a sub-$30k Model 2 in the coming year. Despite short-term challenges like sluggish 1Q demand, the Berlin factory shutdown, and concerns about Elon Musk’s compensation package, Wedbush sees a compelling risk/reward scenario. They highlight Tesla’s advancements in AI and Full Self-Driving (FSD), suggesting the potential for a valuation exceeding $1 trillion as the next chapter of Tesla’s growth unfolds.
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