Tesla Outlook Brightens at Wells Fargo Ahead of 2Q Earnings Release

July 17, 2023: In preparation for Tesla upcoming 2Q earnings release and webcast, Wells Fargo, an investment firm, has reiterated its Equal Weight rating on Tesla’s stock (NASDAQ: TSLA) and raised the price target to $256.00 per share, up from $170.00. This indicates an optimistic outlook for the electric vehicle manufacturer.

The 2Q earnings report, scheduled for Wednesday, July 19th, is eagerly anticipated. Wells Fargo’s analysis predicts Tesla to report earnings per share (EPS) of $0.75, slightly below the market’s consensus estimate of $0.79. One factor contributing to this outlook is the expected decrease in the average selling prices (ASPs) of Tesla vehicles. In Q2, the ASPs are anticipated to decline to $46,000, compared to $47,000 in the previous quarter (Q1). This decrease can be attributed to price reductions and a less favorable mix of vehicle trims during the second quarter.

Specifically, Wells Fargo expects the prices of Models Y and 3 to decrease by around 4.5% compared to the previous quarter, resulting in an overall decline of approximately 13% for these models.

The investment firm highlighted several factors contributing to Tesla’s recent stock surge. These include stronger-than-expected Q2 deliveries, deals to share the charging network with other competitors, reports of the upcoming Model 2 launch by the end of next year, and the Model 3 SR qualifying for full EV tax credit.

As part of their analysis, Wells Fargo adjusted their earnings per share estimates for Tesla in the coming years. They lowered the 2023 estimate from $3.40 to $3.25, the 2024 estimate from $3.75 to $3.60, and the 2025 estimate from $3.85 to $3.75, all to account for the Q2 price cuts. However, they raised the 2026 estimate from $3.75 to $4.30, factoring in the impact of the Model 2 ramp-up and charging network growth.

As of the latest premarket trading on Monday, TSLA shares have risen by 1.92%, further reflecting the positive sentiment surrounding the company’s prospects.

In summary, Wells Fargo’s revised outlook and higher price target indicate increased optimism about Tesla’s performance in the coming quarters, driven by delivery performance, network-sharing deals, and the launch of new models. However, investors should watch the 2Q earnings report to gain further insights into the company’s financial health and prospects.