Tesla’s rally fueled by fleeting ‘retail love,’ Wells Fargo warns
Tesla’s meteoric rise could soon run out of steam, Wells Fargo warned investors in a new note. Analyst Colin Langan reiterated his underweight rating on the electric carmaker, bucking Wall Street’s bullish sentiment. The majority of research analysts covering Tesla have a buy or strong buy rating. Investors were largely bearish on Tesla at the start of the year, with the stock falling steadily and lagging all other members of the Magnificent Seven. But the announcement of several accelerated product launches lifted Tesla from its April lows, and the stock has soared 78% since then. TSLA YTD Mountain Chart TSLA YTD Langan attributes the rally to temporary optimism fueled by better deliveries, approval of Elon Musk’s compensation package, hype around Tesla’s robo-taxis, and technical factors. Retail interest has likely spiked in recent months, while professional investors have seized the opportunity to cover short positions or increase underweight holdings. “Stocks have rallied ~40% (S&P +4%) over the past month, driven largely by ‘razzle-dazzle’ headlines as most fundamentals remain weak,” Langan wrote in a report titled “Will the Retail Puppy Love Last?” published on Monday. “Investors are enthralled by the warning signs.” For example, Langan pointed out that Q2 deliveries were down 5% year-over-year and that sales may have been boosted by financial incentives, he wrote. The robotaxi reveal may have been pushed to October, the analyst added, while Tesla’s Model 3 cars could face new U.S. and European tariff risks. Langan estimates the cost of those tariffs will be about $600 million in 2024 and $1.2 billion next year. Langan’s price target of $120 implies Tesla’s stock could fall 52% from Friday’s close. While the analyst raised his Q2 earnings estimate for Tesla, he lowered his full-year earnings forecast to reflect the additional tariff costs. — CNBC’s Michael Bloom contributed to this report.
