Tesla ‘s massive rally might soon run out of steam, Wells Fargo warned investors in a new note. Analyst Colin Langan reiterated his underweight rating on the electric vehicle manufacturer, contrasting with Wall Street’s bullish sentiment. The majority of research analysts covering Tesla give it a buy or strong buy rating. Investors were largely bearish on Tesla at the beginning of the year, with the stock steadily retreating and lagging all other members of the ” Magnificent Seven ” cohort. But the announcements of some accelerated product launches pushed Tesla from an April low, and the shares have soared 78% since then. TSLA YTD mountain TSLA YTD chart Langan attributed the rally to temporary optimism driven by better deliveries, the approval of Elon Musk’s compensation package , hype around Tesla’s robotaxi and technical factors. Retail interest likely surged in recent months, while professional investors took the opportunity to cover short positions or raise underweight holdings. “The stock rose ~40% (S & P +4%) over the last month, mostly driven by ‘razzle-dazzle’ headlines as most fundamentals remain weak,” Langan wrote in a report entitled, “Will retail puppy love last?” published on Monday. “Infatuated investors ignore the warning signs.” For instance, Langan pointed to second-quarter deliveries shrinking 5% year over year, and sales that were likely boosted by finance promotions, he wrote. The analyst added that the robotaxi reveal has likely been pushed to October, while Tesla’s Model 3 cars are likely to face new U.S. and European tariff risks. Langan estimated the cost of these tariffs to total around $600 million in 2024 and $1.2 billion the year after. Langan’s price target of $120 implies that shares of Tesla could slump 52% from their Friday close. While the analyst raised his second-quarter earnings estimates for Tesla, he lowered his full-year earnings forecast to reflect the added costs of tariffs. — CNBC’s Michael Bloom contributed to this report.
