Why Wells Fargo Says Tesla's Present Is Perfect, Future Tense

Tesla, Inc. TSLA shares have come off notably from a split-adjusted high of $900.40 in late January.

Notwithstanding the sell-off, an analyst at Wells Fargo Securities has a cautious stance on the electric vehicle pioneer.

The Tesla Analyst: Colin Langan initiated coverage of Tesla shares with an Equal-weight rating and $590 price target.

The Tesla Takeaways: Even with the recent declines, Tesla's stock is pricing in sales of over 12 million units in 10 years, analyst Langan said in a note. This is larger than any global automaker, he said. 

In the near-term, deliveries will continue to surprise to the upside, giving support to the Tesla bulls, Langan said. 

Related Link: Tesla To Deliver Model S Plaid On June 3; Musk Calls It 'Fastest Production Car Ever'

On the other hand, the EV maker is likely to be plagued by three concerns, the analyst said: tapering demand for Model 3/Y vehicles, higher EV battery raw material costs and U.S. regulatory risk.

Negative headlines out of China will exacerbate demand worries given that China drove all of Tesla's market share gains over the last year, he said.

Intensifying global EV competition will also pressure Tesla, Langan added. 

EV battery raw material costs have spiked over 50%, the analyst said. This will add $25 per kilowatt-hour or $1,375 per vehicle  once contracts are reset, he said. 

The analyst sees U.S. regulatory risk around Autopilot. The failure to add driver monitoring, Langan said, heightens the risk of U.S. regulators mandating changes.

In a worst-case scenario, Tesla could be forced to disable the system, he said. 

TSLA Price Action: At last check, Tesla shares were adding 2.91% to $597.80. 

Related Link: Musk Says Russia Is On Tesla's Radar As Potential Production Hub: Report

Photo courtesy of Tesla.