Investment bank Wells Fargo has issued a major revision to its outlook for Elon Musk-led EV maker Tesla, downgrading its price target by 37.5pc to $125 from $200 amid concerns about the firm's price cuts.
Wells Fargo automotive analyst Colin Langan also issued a rating of 'underweight' for the automaker, equivalent to a recommendation not to buy shares.
Tesla's ongoing price cuts are not stimulating demand as hoped, according to Langan.
Sign up for EV inFocus
EV inFocus: Hard news for the corporate e-mobility sector
No spam. Unsubscribe anytime.
"The impacts of the price cuts are surprisingly low at this point. We saw volume, if you look at the first half to second half globally, up only 3pc, when pricing was down 5pc," he tells US broadcaster CNBC.
As a result, Langan is expecting deliveries to be about flat year-on-year in 2024. And the lack of immediate growth prospects is turning the microscope more intensely on Tesla's valuation.
"While an EV and battery tech leader, Tesla screens poorly relative to 'Magnificent Seven' peers, trading at 58x PE vs. peers at 31x," Langan writes in a note.
Tesla shares have hit a ten-month low this week, now hovering just under $170/share. Its value has tumbled amid concerns over wider EV demand, as well as comments from management on slowing production volumes.
Tesla has openly admitted to being "between two major growth waves" at its most recent quarterly call, stating that the launch of its next-generation Model 2 EV will be the catalyst for a boost in the company's valuation.
However, Langan also voiced concern about the timeline for the ramp up of that model.
"Launch timing is a concern given planning seemed rushed after a pivot away from Robotaxi and the unprecedented use of unboxed production," he writes.
Langan added that the unboxing 'manufacturing revolution; promised by Musk for the Model 2 ramp was "a bit of a wildcard; it has just never been done before".
However, in positive news for the automaker, production has resumed at its Berlin-Brandenburg gigafactory after it was targeted by arson last week.
The facility typically produces between 4,000 and 6,000 Model 3s and Ys each week. CEO Musk is reported to have told Berlin workers on a visit to the factory that the Tesla Semi truck is slated to be manufactured there, while he told journalists that expansion plans to take the plant up to a 1mn units/year capacity will proceed despite protests.
Ciaran has written about finance, politics and culture. He is passionate about e-mobility and what it means for our way of life.
Ciaran has a Masters in Ancient Philosophy from Oxford University.
