Wells Fargo cuts Tesla stock to Sell equivalent with valuation pricey vs. rest of Mag 7

Wells Fargo cut Tesla (NASDAQ:TSLA) to its lowest rating Wednesday, citing the potential for more price cuts that could hit the bottom line.

Analyst Colin Langan downgraded TSLA to a Sell-equivalent Underweight from Equal Weight and lowered its price target to $125 from $200, saying its valuation premium to the other Magnificent 7 stocks is “likely a risk.”

“While an EV & battery tech leader, TSLA screens poorly relative to Mag 7 peers, trading at 58x PE vs. peers at 31x,” Langan said. The stock trades at about 89x Wells Fargo estimates.

“We see downside risk to volume as price cuts are having a diminishing impact,” Langan said. “We see headwinds from disappointing deliveries & more price cuts, which likely drive negative EPS revisions.”

“Our 2024 & 2025 EPS estimates are 32% & 52% below consensus, respectively.”

“TSLA’s next major launch is the next gen compact SUV, nicknamed Model 2, expected 2H 2025,” Langan added. “Launch timing is a concern given planning seemed rushed after a pivot away from Robotaxi & the unprecedented use of unboxed production.”