Wells Fargo added Tesla (NASDAQ:TSLA) to its Q3 Tactical Ideas List but maintained an Underweight rating on the stock in a note Monday.
The bank's analysts warn of "declining delivery growth driven by lower demand & diminished return on price cuts." They estimate a 14% year-over-year decline in deliveries for 2024, falling short of consensus estimates.
Wells Fargo argues Tesla is a growth company without growth. Their FY24 delivery estimate of 1.55 million units represents a significant decline and "few levers remain to increase volumes outside of pricing & model refreshes."
Price cuts on high-volume models like Model 3/Y have shown "diminishing returns," with a 9% volume decline despite price reductions in Q1. Financing promotions haven't yielded significant improvement either.
Wells Fargo sees "disappointing fundamentals" ahead, with lower deliveries and price cuts leading to a projected 44% year-over-year decline in earnings per share for 2024. They also express concern about the upcoming Model 2's demand and margin profile.
Competition in China, Tesla's largest market, is another pressure point. Wells Fargo highlights Tesla losing market share to domestic competitors like BYD and the rise of Chinese electric vehicle exports.
While Tesla enjoys a "tech premium" due to the upcoming Robotaxi reveal in August, Wells Fargo remains skeptical. They point out experts believe the technology is "years away" and question the feasibility of Tesla's vision-only approach to self-driving cars. The analysts predict "hype into the event followed by selling pressure post-event" if the reveal fails to meet expectations.