Wells Fargo Reaffirms ‘Underweight’ Rating on Tesla
Wells Fargo analyst Colin Langan reiterated on June 9, 2025, an ‘Underweight’ rating on Tesla, with a $120 price target (unchanged).
“Most of TSLA May delivery results are now out. Once again, global deliveries are trending meaningfully weaker, with May trending 23% lower y/y and Q2 QTD trending 21% lower y/y.
All three key regions are double-digit % lower, with EU the worst.
Initial Thoughts
Another Poor Quarter On The Horizon:
TSLA fundamentals of the core auto business continue to weaken. May global deliveries are down 23% y/y. While “order” pricing on the website appears stable over the LTM,aggressive financing promotions continue to act as price cuts.
Risk to Q2 margin remains given lower leverage. Most investor attention is directed at the June 12th Austin Robotaxideployment. We doubt the likely limited debut will be enough to overshadow the poor fundamentals.
Investment Thesis
We have an Underweight rating on TSLA. We see moderating delivery growth driven by lower demand & diminished return on price cuts. We are cautious on margins given likelihood of more price cuts & lower volumes. Moreover, we are concerned about the rollout of their next models and their demand & margins.
We also see risks around increased US regulation on Autopilot & risk to the rollout of previously promised technologies (Dojo, Optimus, true FSD, etc.).
Target Price Valuation
$120.00 from NC. Our base case outlook is consistent with global auto sales of 8.2M in 10 years, 12% EBIT margins, no dilution, and a 30x multiple in 10 years. Our $120 price target reflects the output of our 3-stage DCF analysis of the core auto business assuming a 13% WACC, 10% mid-term growth, and a 10% terminal growth rate.
Upside Risks
- New capacity additions
- Positive news on Optimus Progress
- Positive reviews of the FSD update
- Addition of a US EV credit within the proposed stimulus bill
- Decline in commodity prices
- New market expansion in solar or storage”
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