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Wells Fargo Analyst Predicts Change for Tesla in Q3 and Q4

Tesla could see a boost in Q3 deliveries but face challenges with declining sales in Q4.

July 10, 2025 at 12:40 PM

This Analyst Sees Tesla Popping In Q3 And Dropping In Q4

Expert analysis highlights a potential transformation in Tesla's financial landscape.

Wells Fargo Analyst Predicts Tesla Gains In Q3 Followed By Declines In Q4

Analysts at Wells Fargo are changing their outlook on Tesla as key income sources decline. Colin Langan, a Wells Fargo analyst, has reiterated an 'Underweight' rating for Tesla with a price target of $120 per share. For the second quarter, Langan estimates a modest earnings per share of $0.2, falling short of the $0.41 consensus figure. Key factors include an expected drop in EV credits and declining margins in the energy sector. Tesla could report $650 million in EV credits for Q2, but this is just a step back from $595 million in the previous quarter. The significant drop in regulatory credits is tied to the conclusion of federal tax incentives by late September and December. Langan predicts a surge in deliveries for Q3 before a sharp decrease in Q4, linked to changing market dynamics and price adjustments.

Key Takeaways

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Tesla may see a strong third quarter followed by challenges in the fourth quarter.

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Analysts expect a significant drop in regulatory credit income as federal incentives end.

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Lower margins in the energy business could strain overall profitability for Tesla.

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Wells Fargo projects Tesla's automotive gross margin to recover slightly, highlighting ongoing volatility.

"We now expect Q3 deliveries to eclipse 400K units, followed by a large drop in Q4."

This quote from Colin Langan underlines the immediate sales surge and subsequent decline for Tesla.

"Once the ZEV credits income stream ends in Q3, Langan expects Tesla's total income from regulatory credits to be slashed in half."

The statement emphasizes the critical impact of changing regulations on Tesla's financial health.

This analysis from Wells Fargo paints a challenging picture for Tesla. As federal incentives tend to drive demand, the upcoming end of these credits could create volatility in sales. Such shifts may reflect broader challenges in the EV market, pushing the company to rethink its pricing strategy. This scenario not only affects Tesla but also raises questions on how other car manufacturers will respond to changing regulations and consumer demand. Dispatching more cars now could lead to an immediate pop in sales, but the long-term impact remains clouded by falling margins and credit losses.

Highlights

A pop in Q3 could be followed by unsteady declines in Q4.
As federal credits dwindle, Tesla faces serious income risks.
Tesla's fate rests on shifting demand and regulatory changes.
Upcoming price cuts highlight Tesla's struggle with margins.

Financial and Regulatory Risks Loom Over Tesla

The upcoming end of federal EV credits and reduced margin expectations could significantly impact Tesla's revenue streams and overall financial stability. Analysts warn that this may lead to a sharp decline in fourth quarter performance, which poses risks for investors if sales fall short.

As market conditions evolve, the implications for Tesla's earnings will reveal themselves in the coming quarters.

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tesla financials analyst business economics automotive

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