Wells Fargo slashes Tesla’s (TSLA) price target to $125, causing the stock to drop below the $170 level on Wednesday. This downgrade comes as analysts express concerns about lower demand and growth prospects for Elon Musk’s electric vehicle company. TSLA is now trading at its lowest point since May 2023, with technical support expected in the $150s and $160s.
The broader market also saw some fluctuations, with the NASDAQ and S&P 500 experiencing slight declines while the Dow Jones Industrial Average managed to gain some ground amidst rising Treasury yields.
Tesla stock update: Wells Fargo bearish on TSLA
Wells Fargo analyst Colin Langan has given Tesla stock a sell rating due to perceived overvaluation compared to other tech giants. Langan highlighted Tesla’s high price-to-earnings ratio of 58x versus the industry average of 31x among the so-called Magnificent 7 stocks.
Despite the recent downward trend in Tesla stock price, with a 43% drop from its peak in July 2023 and a 59% decline from its all-time high in November 2021, some firms like Deutsche Bank and Morgan Stanley still maintain buy ratings on TSLA. However, Wells Fargo remains cautious, particularly about the company’s profit outlook over the medium term.
In addition to concerns about profitability, Langan predicts negative earnings per share revisions in the future due to ongoing price cuts and disappointing delivery numbers for Tesla vehicles. This skepticism is shared by other analysts, with Morgan Stanley endorsing Ford as its top automotive pick for its profitability from internal combustion engine models.
Meanwhile, Swedish EV manufacturer Polestar reduced the price of its Polestar 3 model by 12% due to sluggish demand, reflecting broader challenges in the electric vehicle market. Elon Musk’s visit to Tesla’s Berlin factory coincided with an attack on the site’s electricity infrastructure by environmental activists.
Electric vehicles: a brief overview
Electric vehicles (EVs) utilize rechargeable batteries and electric motors for propulsion instead of traditional internal combustion engines. While EV technology has been around for decades, advancements in lithium-ion battery technology in the late 20th and early 21st centuries have enabled mass production of EVs. This shift towards electric propulsion marks a significant evolution in the automotive industry.