JasonDoiy
Wells Fargo added Tesla (NASDAQ:TSLA) to its Q3 Tactical Ideas List as a stock that may see a near-term decline.
The firm kept an Underweight rating on Tesla (TSLA) as it pointed to the expectation for declining delivery growth driven by lower demand and diminished returns on price cuts. Analyst Colin Langan and his team estimate automotive gross margin ex-credits will fall further due to the likelihood of more price cuts and lower volumes. Wells Fargo’s FY24 delivery estimate of ~1.55 million units for Tesla (TSLA) represents a ~14% year-over-year decline and is about 13% below the consensus expectation.
“We remain concerned with recent moderating trends, across all three key regions (US, EU, China). Few levers remain to increase volumes outside of pricing & model refreshes, as the company has resorted to financing promotions with seemingly little effect. Price actions thus far have indicated diminishing returns on volume.”
Looking ahead, flattening EV adoption in the U.S. and European Union, on top of aggressive competition in China, is seen leaving very few immediate levers for Tesla (TSLA) to pull to increase volume. The Wells analysts team is concerned about Model 2 demand and the margin profile for a smaller, mass-market vehicle.
Wells Fargo noted that Tesla (TSLA) now screens poorly relative to other Magnificent 7 stocks, with it trading at ~82X PE vs. Mag 7 peers at ~35X, even as TSLA now has a lower outlook for consensus 3-year EPS growth in comparison to the group. As for the robotaxi dreams, Wells Fargo noted experts say the tech is years away and question if FSD is possible with a vision-only approach.
Shares of Tesla (TSLA) rallied 5.2% in afternoon trading on Monday after Chinese electric vehicle companies issued strong deliveries reports for June. The Austin-based company will disclose its Q2 deliveries tally on Tuesday.
