Shares of Tesla Inc (NASDAQ: TSLA) are priced for perfection following a 100% increase over the past three months.
Even a minor setback could trigger a sharp decline in this EV stock that’s currently trading at a massive premium to the industry at large.
In fact, Wells Fargo analyst Colin Langan continues to see a possibility of a crash in Tesla stock that could bring it all the way back to the $125 level.
Langan does not expect the company’s robotaxis to be its savior in 2025.
Minor setback could trigger a crash in Tesla stock
Tesla runs the risk of taking a hit to its net margins as Chinese rivals, including BYD and NIO continue to win share not just in their homeland but also in the international markets.
Their competitively priced, high-quality offerings are resonating well with consumers worldwide.
So, if Tesla misses expectations or so much as takes a cautious view on the future when it reports earnings on January 29th – investors will likely punish its shares rather aggressively.
Earlier this month, Tesla said it delivered 495,570 vehicles in its fourth quarter to end the year with a total of 1,789,226 deliveries marking its first-ever annual decline in deliveries. The EV company delivered 1.81 million vehicles in 2023.
Cybercab and Optimus projects are severely overvalued
Wells Fargo cited persistently weak fundamentals as it stuck with its contrarian “underweight” rating on Tesla shares today.
The investment firm remains ultra bearish on TSLA as price cuts are failing to boost its deliveries amidst rising competition from China-based electric vehicle manufacturers.
Additionally, the company’s EVs will turn about 12% more expensive if Donald Trump chooses to rescind parts of the Inflation Reduction Act after taking office on January 20th. “Despite a lot of razzle-dazzle in 2024, these concerns remain,” Colin Langan told clients on Wednesday.
Langan expects Tesla to be hit the hardest if EV tax credits are removed under the new government, citing a 41% decline in sales it witnessed when Germany ended its electric car subsidy programme in late 2023.
Wells Fargo also sees the company’s Cybercab and Optimus projects as severely overvalued with material downside risk. “We believe Cybercab risk outweighs the reward, given the potential for setbacks on regulation or safety that would damage credibility,” it argued in a research note today.
Tesla Inc is expected to report per-share earnings of 64 cents for its fourth financial quarter. In the same quarter last year, it had earned 57 per share. Last week, the EV maker debuted its new Model Y with enhanced features in China.
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