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Wells Fargo Stays Bearish on Tesla: 50% Downside Risk Predicted
Jul 16, 2024 6:37 AM - Parth Sanghvi
Image credit: Charlie Deets
Wells Fargo Stays Bearish on Tesla: 50% Downside Risk Predicted
Tesla (TSLA) bulls beware! Wells Fargo analysts remain firmly in the "bear" camp, reiterating their Underweight rating and a price target that implies a significant downside for the stock.
Tesla's Rally: "Razzle-Dazzle" or Sustainable Growth?
Despite Tesla's recent price surge of roughly 40%, Wells Fargo dismisses it as a rally fueled by "razzle-dazzle" headlines and short-term speculation. They believe that the underlying fundamentals of the company haven't improved significantly.
Retail Frenzy vs. Weak Fundamentals
The analysts suspect the recent rally is primarily driven by retail investors, potentially squeezing out short positions and forcing rebalancing among long-only investors. They express concern that investors are ignoring potential warning signs and focusing more on hype.
Bright Spot: Tesla Energy
Wells Fargo acknowledges a bright spot in Tesla's story - the Energy business. The company reported a record 9.4 MWh of energy storage deployed in Q2, more than double the previous quarter. This segment boasts impressive margins, leading Wells Fargo to raise their FY24 Energy Gen sales estimates.
Downside Risk: A Technical and Fundamental Play?
While Tesla's recent rally might be attributed partly to retail investor enthusiasm, Wells Fargo highlights technical factors as well. Short covering and under-ownership by mutual funds could have contributed to the surge. However, they maintain their bearish stance due to their concerns about the company's long-term fundamentals.
Call to Action
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Disclaimer: This blog post does not provide financial advice. Please consult with a financial advisor before making any investment decisions.
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