Wells Fargo Predicts $154 Drop for Tesla (TSLA) Despite a 25% Increase in Car Sales

Quick overview

Tesla (TSLA) will be releasing its second quarterly earnings report on Wednesday at the end of the day, and analysts anticipate that the stock will fall 67% in 12 months.

Wall Street expects major losses for Tesla stock this year, with Wells Fargo analysts predicting the current stock price of $384 is overvalued and advising shareholders to sell. Tesla sold more than 480,000 vehicles this quarter, which is a 25% bump from the same quarter last year.

Even that is not enough to make investors excited for the automaker’s prospects for the Q2 report. The problem is that Tesla is only making marginal profits off of those recent sales, so their revenue numbers will be closely scrutinized as shareholders look at profit margins.

Tesla Price Target Increased, but Still a Poor Investment

Analysts at Wells Fargo upgraded the price target for Tesla over the next 12 months from $125 to $130. Even if Tesla stock hits that higher target, that is still a drop of about 67% from its current price. That is a damning assessment for the company and one that other investment firms share. However, the company surprised analysts with its last two quarters, beating predictions for earnings per share by nearly 14% in April and 11% in January.

On Monday morning, Tesla stock rose 1.35%, and there seems to be some support behind the company ahead of their earnings, but that sentiment could shift on Wednesday as the earnings release draws closer. The broader market is slightly bullish, with tech stocks moving upward and oil and gas prices still elevated.

Wells Fargo rated the stock as Underweight, meaning that investors should be selling it. If the stock behaves like it did following the last quarterly earnings report, then it will drop off but then gain upward momentum shortly after. The problem last quarter was that Tesla was not selling as many cars as it had in previous quarters, and investors were worried about the development costs of new technology as well as how much time and cash were being poured into new projects.

Tesla stock is currently sitting right where it was after the fall that followed the last quarterly earnings report. All the upward progress the stock made since then, including a climb to $445, has been wiped out. Initial excitement about the SpaceX stock index launch as well as new Tesla robots and a new Tesla model have all died away since those stock spikes throughout the month of May. Now, investors are worried about profit margins, and analysts believe that Tesla stock is going to plummet in the coming weeks and months.

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Timothy St. John

Financial Writer - European & US Desks

Timothy St John is a seasoned financial analyst and writer, catering to the dynamic landscapes of the US and European markets. Boasting over a decade of extensive freelance writing experience, he has made significant contributions to reputable platforms such as Yahoo!Finance, business.com: Expert Business Advice, Tips, and Resources - Business.com, and numerous others. Timothy's expertise lies in in-depth research and comprehensive coverage of stock and cryptocurrency movements, coupled with a keen understanding of the economic factors influencing currency dynamics. Timothy majored in English at East Tennessee State University, and you can find him on LinkedIn.

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