Investors Alert: Tesla Stock Added to Wells Fargo’s Short Ideas List Amid Concerns Over Weak Q1 Performance

Investors Alert: Tesla Stock Added to Wells Fargo’s Short Ideas List Amid Concerns Over Weak Q1 Performance

As fears of a weak first quarter weigh on the electric vehicle giant, Wells Fargo analysts have decided to add Tesla (NASDAQ:) stock to the company’s short list of ideas.

However, the investment bank isn’t the only one being pessimistic ahead of Tesla’s first quarter results. Several analysts lowered their targets before publication.

Analysts cut numbers in first quarter shipments report

Wedbush said Tesla’s first-quarter deliveries signaled a “nightmare quarter” for the Elon Musk-led company, which is struggling with slow deliveries and weak demand in China.

“The biggest and most concerning issue for Tesla (and its investors) remains China, as growing electric vehicle competition and persistent price wars have made this key market very difficult for Tesla last year and especially this quarter,” Wedbush analysts wrote in a note.

HSBC recently reiterated a reduced rating and $143 price target on Tesla, lowering its forecast, saying cheaper Teslas don’t necessarily lead to higher volumes.

“We have reduced our forecast to reflect larger than expected price declines (around 10% instead of 5%). We can see that these price declines could be supported by cost improvements, but we are not convinced that continued devaluation is what the market wants,” the firm wrote.

Elsewhere, Citi lowered its price target for Tesla from $224 to $196, while maintaining a neutral rating on the stock.

“Ahead of the release of Tesla’s first quarter deliveries, we are reducing our estimates to reflect recent data. Our estimate for first quarter deliveries is decreasing from 473.3k to 429.9k,” Citi said.

They added: “While buy-side Q1 delivery estimates (we think in the low 400s) are well below sell-side consensus (460-470,000, but falling), the pattern remains difficult with street estimates still looking too high, not only for 2024 but also for 2025.”

Wells Fargo Sees Big Downside for Tesla Stock

Of course, Wells Fargo is another company that is pessimistic on Tesla. The firm added TSLA stock to its list of second-quarter 2024 tactical ideas and maintained an underweight rating on the shares in a Monday note.

Wells Fargo said: “We are seeing moderate shipment growth due to lower demand and lower ROI on price reductions. »

The bank’s FY24 delivery estimate of 1.8 million units represents flat year-over-year growth and remains 10% below consensus. Wells Fargo explained that it remains concerned about recent flattening trends in all three key regions (US, EU, China).

“There remain few levers to increase volumes outside of pricing and model refreshes, as government incentives could run out,” Wells Fargo added. “So far, price movements have indicated diminishing returns on volume.”

Wells Fargo notes that price declines remain a significant risk for Tesla as it projects moderate earnings growth ahead. They also highlight concerns in China.

“Stagnation in electric vehicle adoption in the United States and European Union, as well as aggressive competition in China, leaves few immediate levers to increase volumes,” they said. “Rapid price reduction on the high-volume Model 3/Y over the past year has yielded diminishing returns; with only 3% volume growth on 5% H/H price declines in 2H23.

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