Fast Facts
- Wells Fargo analyst lowers Tesla's stock rating to underweight
- Tesla stock has slumped to a 10-month low
- Wedbush analysts, however, have an optimistic take
Once the darling of the Magnificent 7, Elon Musk's Tesla (TSLA) has had a rough time of it the past 10 months.
As the shares slumped to a 10-month low Wednesday, with a cumulative decline of more than $240 million, analysts are changing their ratings on the EV maker.
The latest downgrade comes from Wells Fargo analyst Colin Langan, who said in a client note that he was lowering the stock's rating to underweight and cutting his price target to $125 a share. The stock at last check was trading above $173.
“We expect volumes to be flat in 2024 and down in 2025," he added. "In the wake of [price] cuts are lower lease residuals, disgruntled customers and the possible loss of the luxury brand premium."
However, one analyst made clear he still believed in the EV maker in his own note to investors. Wedbush's Dan Ives says the "negative sentiment is way overdone," with "Musk and Tesla getting attacked by the bears in all directions."
Related: Analyst unveils surprising forecast for Tesla
"We believe the stock is way overshooting on the negative front as the demand story for Tesla is more in stabilization mode heading to the rest of 2024, price cuts are moderating, battery costs/production is showing strong cost efficiencies, and a Model 2 (sub $30,000 vehicle) is on the road map for the next year," the note reads.
"In the near term it's not roses and rainbows with demand sluggish for 1Q, the Berlin arson shutdown, and noise around the Musk [compensation] package.
"That said, we believe the risk/reward is extremely compelling at these levels with the AI story and [Full-Self-Driving] making major strides at Tesla and in our opinion represents a valuation that could exceed $1 trillion as this next chapter of the Tesla growth story plays out in the field."
Wedbush's Ives: Advice to Tesla board
Wedbush also had three suggestions for the Tesla board to stop what it calls a "category 5 hurricane" over Tesla stock:
1. Create a new [compensation] package that supersedes this 2018 one along with a new package post proxy that will be voted at the next shareholder meeting in May.
2. Devise a new comp package that would get Musk directly to the 25% voting share bogey he has discussed over the past month and voted on at the next shareholder meeting.
3. We believe Tesla moving to Texas would clear the way for the board to go down the path to get Musk towards the 25% voting rights and do a comp package that supersedes the 2018 plan; making the Delaware ruling noise.
Wedbush ended the note with a bright outlook, saying that while the demand story for EVs globally has "clearly moderated," it believes Tesla is "on a broader trajectory to see growth and margin improvement return to the story over the coming quarters."
"Now is NOT the time to throw in the towel on Tesla. ... [We] have a high level of conviction at current levels despite the dark black clouds forming," Wedbush said. "We maintain our outperform rating and $315 price target."
Related: Chinese smartphone giant targets Elon Musk with latest announcement
