Wells Fargo Remains Fully Bearish on Tesla – Free Cash Flow to Turn Negative in 2025, Even Robotaxi Won’t Help

TradingKey - After rallying nearly 50% from its late-April lows, Tesla’s stock has recently shown signs of weakness ahead of its Robotaxi event on June 22. Wells Fargo analyst Colin Langan has reiterated his underweight rating on the stock, warning that a combination of weaker deliveries, declining regulatory credits, and pricing pressure could drag Tesla’s 2025 profits down by 16%.

In a recent note, Langan argued that Tesla’s fundamentals may be worse than expected. He forecasts that Tesla’s Q2 vehicle deliveries will fall 21% year-over-year, with total deliveries estimated at 343,000 units, well below the Wall Street consensus of 411,000 units.

With weak delivery trends continuing through the first two months of Q2, Tesla would need to deliver over 50% more vehicles in June than in May to meet the current average estimate — a highly unlikely scenario.

Langan pointed out several key headwinds:

• Weak demand for the new Model Y
• No updates on the long-awaited affordable EV that was supposed to drive second-half growth
• Persistent promotional activity putting downward pressure on margins

Adding to the concerns, the U.S. Senate is considering stripping California of its air pollution regulatory authority, which would eliminate Tesla’s ability to generate Zero Emission Vehicle (ZEV) credits — a major source of profit.

Wells Fargo estimates that the loss of these credits alone could reduce Tesla’s EBIT by 16% annually.

As a result, Langan expressed serious concerns about Tesla’s financial outlook, warning that the company could see negative free cash flow in 2025 — a sharp reversal from its previous cash-generating trend.

Robotaxi: More Risk Than Reward?

Regarding the upcoming Robotaxi launch, Langan also issued a cautious outlook. The current Full Self-Driving (FSD) beta test in Austin appears to be operating at low speeds, with limited scope and tight regulatory oversight.

He warned that rushing the rollout could lead to accidents, which would likely cause significant setbacks for the autonomous driving program.

Bearish Price Target

Langan maintained his price target of $120 per share, far below Tesla’s latest closing price of $316.35.

According to TradingKey, the average analyst price target stands at $289.30, implying a 12% downside from current levels.

Analyst Price Targets for Tesla, Source: TradingKey