Tesla Stock Tanks: Wells Fargo Predicts 53% Drop
Tesla Stock Plunges as Wells Fargo Predicts 53% Drop; Stifel Maintains Buy Rating
Tesla (NASDAQ:TSLA) stock continues its downward trend, with Wells Fargo predicting a potential 53% drop from current levels, reaching a $130 price target. This forecast, which prompted Wells Fargo to reiterate its “Underweight” rating and add Tesla to its second-quarter tactical ideas list, reflects a confluence of concerns about the company's performance and outlook.
The bank cites several key factors contributing to its bearish outlook. Tesla's vehicle sales are slowing in major markets. Wells Fargo projects 40% lower deliveries in Europe, 14% lower in China, and 3% lower in North America through 2025. This slowdown is attributed partly to nationwide protests against the company linked to CEO Elon Musk's political affiliations and his involvement with DOGE cryptocurrency. The potential loss of a $7,500 federal tax credit, coupled with previous price cuts, further hampers sales, leading Wells Fargo to estimate a 25% reduction in Tesla's earnings per share by 2025.
The anticipated launch of a lower-cost vehicle, priced under $30,000, is not viewed as an immediate solution. Wells Fargo expresses caution due to the lack of details surrounding the “Model 2.5,” noting that even if successful, it could cannibalize sales of higher-priced models by approximately 16%. Furthermore, the planned June launch of Tesla's robotaxi network in Austin, Texas, faces skepticism, with concerns raised about the safety and efficacy of its vision-only autonomous driving technology compared to competitors using LIDAR systems. Wells Fargo also points out that Tesla's current price-to-earnings multiple of 96x significantly surpasses that of its mega-cap tech peers, exceeding the average of the "Magnificent 7" by nearly four times, while projecting slower earnings growth at 3% over three years compared to the "Magnificent 7's" approximately 15%.
Conversely, Stifel analyst Stephen Gengaro maintains a Buy rating, albeit with a reduced price target of $455 from $474, representing a projected 72% upside. Stifel acknowledges the challenging quarter ahead, citing subdued delivery expectations due to anticipated new models and negative public sentiment towards Tesla, particularly among Democratic voters. However, Stifel anticipates long-term growth driven by the rollout of Tesla’s full self-driving system, beginning in Austin, Texas in June, and anticipates limited impact from potential U.S. auto import tariffs due to Tesla's domestic production. Stifel's revised Q1 and full-year delivery estimates for Tesla stand at 353,418 and 1.86 million, respectively, down from previous forecasts of 458,672 and 2.08 million.
Tesla (NASDAQ:TSLA) stock continues its downward trend, with Wells Fargo predicting a potential 53% drop from current levels, reaching a $130 price target. This forecast, which prompted Wells Fargo to reiterate its “Underweight” rating and add Tesla to its second-quarter tactical ideas list, reflects a confluence of concerns about the company's performance and outlook.
The bank cites several key factors contributing to its bearish outlook. Tesla's vehicle sales are slowing in major markets. Wells Fargo projects 40% lower deliveries in Europe, 14% lower in China, and 3% lower in North America through 2025. This slowdown is attributed partly to nationwide protests against the company linked to CEO Elon Musk's political affiliations and his involvement with DOGE cryptocurrency. The potential loss of a $7,500 federal tax credit, coupled with previous price cuts, further hampers sales, leading Wells Fargo to estimate a 25% reduction in Tesla's earnings per share by 2025.
The anticipated launch of a lower-cost vehicle, priced under $30,000, is not viewed as an immediate solution. Wells Fargo expresses caution due to the lack of details surrounding the “Model 2.5,” noting that even if successful, it could cannibalize sales of higher-priced models by approximately 16%. Furthermore, the planned June launch of Tesla's robotaxi network in Austin, Texas, faces skepticism, with concerns raised about the safety and efficacy of its vision-only autonomous driving technology compared to competitors using LIDAR systems. Wells Fargo also points out that Tesla's current price-to-earnings multiple of 96x significantly surpasses that of its mega-cap tech peers, exceeding the average of the "Magnificent 7" by nearly four times, while projecting slower earnings growth at 3% over three years compared to the "Magnificent 7's" approximately 15%.
Conversely, Stifel analyst Stephen Gengaro maintains a Buy rating, albeit with a reduced price target of $455 from $474, representing a projected 72% upside. Stifel acknowledges the challenging quarter ahead, citing subdued delivery expectations due to anticipated new models and negative public sentiment towards Tesla, particularly among Democratic voters. However, Stifel anticipates long-term growth driven by the rollout of Tesla’s full self-driving system, beginning in Austin, Texas in June, and anticipates limited impact from potential U.S. auto import tariffs due to Tesla's domestic production. Stifel's revised Q1 and full-year delivery estimates for Tesla stand at 353,418 and 1.86 million, respectively, down from previous forecasts of 458,672 and 2.08 million.
