Investing.com -- Wells Fargo reiterated its Underweight rating on Tesla (NASDAQ:TSLA) shares in a note Friday, lowering its price target to $130 from $135, citing weak fundamentals, slowing sales, and margin pressures.
Despite Tesla’s 40% year-to-date decline, the firm believes the stock still has "more than 40% downside" as earnings estimates continue to fall.
"We’ve repeatedly flagged the weak core biz fundamental since our March ’24 downgrade," Wells Fargo (NYSE:WFC) analysts wrote, adding that "shocking YTD EU sales have finally shifted focus to fundamentals."
The bank sees further risks to volumes, pricing, and margins, leading to lower EPS estimates and a reduced price target.
Tesla’s sales are down 16% year-to-date, with European sales dropping 45% in January and 41% in February across the region’s top nine markets.
In China, sales are down 14% for the year, while U.S. sales fell 11% in January, according to S&P estimates.
The bank also noted concerns about recent protests and vandalism, which could impact future demand.
Wells Fargo lowered its Q1 2025 delivery estimate to 360,000 units, down 27% quarter-over-quarter and 7% year-over-year.
While a Model Y refresh and the new Model “2.5” launch in Q2 could drive some recovery, the firm warns that price cuts are losing their effectiveness, competition in China remains fierce, and the new model may cannibalize existing Model 3/Y sales.
The analysts remain skeptical about Tesla’s planned CyberCab launch in Austin, stating that it has "limited testing & concerns around the vision-only approach."
Given these risks, they expect further downward momentum in the stock, stating that "if fundamentals matter, the momentum likely turns negative as consensus estimates fall."