Tesla stock rating reiterated at Underweight by Wells Fargo amid Q2 concerns

Investing.com - Wells Fargo (NYSE:WFC) has maintained its Underweight rating and $120.00 price target on Tesla (NASDAQ:TSLA) stock, citing expectations for a second-quarter earnings miss and ongoing fundamental challenges. According to InvestingPro data, 15 analysts have recently revised their earnings estimates downward, while the stock currently trades at a P/E ratio of 155.5x, suggesting significant premium valuation levels.

The bank forecasts Q2 earnings per share of $0.20, below the consensus estimate of $0.41, primarily due to lower electric vehicle credits and weaker Energy Generation margins. Wells Fargo notes that while auto gross margins excluding EV credits may improve slightly to 13.3% from 12.5% in Q1, this improvement will be offset by other factors. InvestingPro analysis shows Tesla’s overall gross profit margin stands at 17.66%, supporting concerns about margin pressure. With earnings scheduled for July 23, investors can access comprehensive analysis through InvestingPro’s detailed Research Report, which covers key metrics and growth drivers.

The firm projects a temporary delivery surge in Q3 to over 400,000 units as customers rush to take advantage of the $7,500 IRA EV tax credit before it expires on September 30, followed by a significant drop in Q4. For fiscal year 2025, Wells Fargo expects deliveries of 1.48 million units, approximately 10% below consensus and down 17% year-over-year. This forecast comes as Tesla maintains strong financial health, with InvestingPro data showing the company holds more cash than debt and maintains sufficient liquidity to cover short-term obligations.

The revocation of California Air Resources Board’s waiver in late May is expected to end Zero Emission Vehicle credits, which Wells Fargo estimates made up about 50% of Tesla’s regulatory credit sales. The bank projects regulatory credits will be cut in half from Q1’s base of approximately $1,800 per unit to around $900 per unit in Q3/Q4.

Tesla’s Energy Generation business faces additional headwinds from Chinese battery tariffs, which averaged about 70% in Q2 before settling at approximately 30%. Wells Fargo estimates these tariffs could lower Energy Generation margins from 26% to 15% in 2025, with Q2 margins potentially dropping to 12% before recovering to 17% in Q4.

In other recent news, Tesla has announced its annual shareholder meeting will be held on November 6, 2025, with related deadlines for shareholder proposals and director nominations outlined in a statement filed with the Securities and Exchange Commission. The company has set July 31, 2025, as the deadline for shareholders to submit proposals for inclusion in the proxy statement. In financial developments, RBC Capital has raised its price target for Tesla to $319 from $307, maintaining an Outperform rating. The firm noted Tesla’s Q2 2025 vehicle deliveries met consensus expectations, while energy storage sales were slightly below recent levels. RBC Capital forecasts Tesla’s automotive gross margins excluding credits at 13.7% for the quarter, slightly above the consensus estimate. Additionally, Schwab’s latest report highlights Tesla as the top stock purchase among retail traders in June 2025, driven by interest in its robotaxi introduction in Austin. These developments come amid ongoing interest and activity surrounding Tesla’s market performance and strategic initiatives.

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