Shares of Tesla (TSLA) are down at the time of writing after Wells Fargo issued a warning saying that the EV maker’s second-quarter performance may be weaker than expected. Indeed, analyst Colin Langan stated that vehicle deliveries are tracking flat compared to an already weak Q1. This means that in order to hit the Wall Street estimate of 411,000 units for the quarter, Tesla would need to increase June deliveries by more than 50% compared to May. As a result, the firm now projects that Tesla’s full-year deliveries will fall by 21% from last year.
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Unsurprisingly, Wells Fargo expects the lower delivery volume to hurt Tesla’s profit margins. Langan also pointed out that reduced income from Zero Emission Vehicle (ZEV) credits could be another drag on earnings. When combining these factors with the over $11 billion in planned capital expenditures and possible working capital challenges, Wells Fargo sees a real risk that Tesla could end up with negative free cash flow in 2025.
To make matters worse, the firm is also worried about the lack of news regarding Tesla’s long-awaited affordable EV, which many bulls believe is key to increasing sales in the second half. Additionally, Tesla’s robotaxi plans are not impressing Wells Fargo, as the analyst notes that Full Self-Driving tests in Austin appear limited, slow, and closely monitored, which raises the risk that any accident during a rushed rollout could cause major setbacks. As a result, Langan has a Sell rating on Tesla with a $120 price target.
What Is the Prediction for Tesla Stock?
Overall, analysts have a Hold consensus rating on TSLA stock based on 14 Buys, 12 Holds, and nine Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average TSLA price target of $286.14 per share implies 10.3% downside risk.
