Wells Fargo said Tesla’s shares will likely take a hit in the third quarter as the company’s strategy of boosting sales by lowering prices loses momentum. The bank expects Tesla to ship 1.55 million vehicles this year, down 14% from a year ago and 13% below the consensus estimate. “We remain concerned by recent moderation in the three major regions (U.S., EU, and China),” analysts led by Colin Langan told clients in a research note on Monday. “The company’s reliance on largely ineffective credit-backed promotions leaves it with few levers left to boost sales volumes outside of pricing and model refreshes,” the analysts said. TSLA YTD Line Tesla Wells Fargo has an underweight rating on Tesla and a price target of $120 a share, suggesting a nearly 40% decline from Friday’s closing price of $197.88. The electric car maker’s shares are down about 17% year to date as of Monday morning trading in the U.S. With electric vehicle adoption in the US and EU plateauing and Tesla facing stiff competition from companies like BYD in China, “there are few immediate levers to boost sales,” Wells Fargo analysts said. The research team is also concerned about demand and margins for Tesla’s small, mass-market Model 2 car. Lower deliveries and price cuts could cause Tesla’s earnings per share to fall 44% year-over-year, the bank said. “We are cautious about margins, given the possibility of further price cuts and lower sales,” Wells Fargo analysts said. “In addition, we are concerned about the launch of upcoming models and their demand and margins.” Tesla’s second-quarter financial results are due to be released on July 17, according to FactSet.
Wells Fargo predicts Tesla shares will be hurt by falling demand
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