Wells Fargo: Tesla’s short-term lift doesn’t resolve long-term concerns

Investing.com -- Tesla may benefit from a temporary sales boost, but fundamental challenges still weigh on the company’s long-term outlook, according to Wells Fargo. 

The bank reiterated its Underweight rating and $120 price target on the stock, warning that Tesla’s “short-term help” does not address “long-term question marks.”

Wells Fargo raised its full-year 2025 delivery forecast to 1.48 million units, up from 1.4 million, citing stronger-than-expected second-quarter deliveries and an anticipated Q3 pull-forward ahead of the Sept. 30 expiration of the $7,500 IRA EV tax credit. 

However, the firm expects a sharp reversal: “We now expect Q3 deliveries to eclipse 400K units, followed by a large drop in Q4.”

The firm forecasts Q2 earnings per share of $0.20, more than 50% below consensus estimates of $0.41, largely due to “lower EV credits & weaker Energy Gen margins.” 

Regulatory credits, which made up around 32% of Tesla’s 2024 EBIT, are set to shrink, according to the bank.

“We estimate reg credits fall ~$170M from Q1 to Q2,” with Zero Emission Vehicle (ZEV) credits likely to end in Q3 following California’s waiver revocation.

Tesla’s Energy Generation margins are also said to be at risk. Wells Fargo estimates margins could fall to 12% in Q2 from 26% last year, as “batteries for TSLA’s Energy Gen biz are LFP batteries from China & subject to China tariffs.”

Looking ahead, the firm anticipates Tesla (NASDAQ:TSLA) will “cut pricing by ~4% in Q4” to offset the end of IRA credits, with 2025 EPS projected at just $0.80, roughly 57% below consensus. 

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Despite near-term volume strength, Wells Fargo cautioned, “fundamentals remain tough.”

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