In-Depth Analysis: Wells Fargo Analysts Place Tesla on Underweight List for Q4 2024 Amid Concerns of Weakening Demand and Margin Impact
In a recent note, Wells Fargo analysts raised concerns about Tesla's performance in the upcoming months, placing the electric vehicle giant on their Underweight Tactical Ideas list for Q4 2024. The analysts cited worries about declining delivery growth driven by lower demand and the negative impact of price cuts on the company's margins.
According to Wells Fargo, Tesla's strategy of cutting prices to stimulate demand may have diminishing returns, with auto gross margins expected to fall by approximately 400 basis points year-over-year due to lower volumes and continued price cutting. This bearish view is further fueled by increasing competition in the electric vehicle market and economic factors weighing on consumer demand.
Wells Fargo maintained an Underweight rating and set a $120 price target for Tesla, suggesting a potential 54% downside. The bank cautioned investors about Tesla's valuation compared to other stocks and highlighted risks to its AI strategy.
This pessimistic outlook from Wells Fargo contrasts with a note from Morgan Stanley, which maintained an Overweight rating on Tesla. The Morgan Stanley analysts pointed to the potential of Generative AI and Large Language Models as the "great unlock" for Tesla's value, particularly in monetizing its AI capabilities.
Overall, investors should be cautious about Tesla's stock in Q4 2024, as the company faces challenges from weakening demand, margin pressures, and increasing competition in the electric vehicle market. It is essential to stay informed about the latest developments and analyst recommendations to make informed investment decisions in the ever-changing financial landscape.