March 13 (Reuters) - Tesla shares dropped about 2% on Wednesday after Wells Fargo raised concerns over the waning impact of price cuts by the world's most valuable automaker on the demand for its electric vehicles and downgraded them to "underweight".

Tesla is battling a global slowdown in EV demand following last year's price war that hurt margins and has lost nearly $200 billion in market value as its shares slumped nearly 29% this year.

The brokerage also slashed Tesla's price target to $120 from $200, which is one of the lowest on Wall Street and implies a 32% downside to stock's last closing price.

Investor concerns over the company's prospects have been high since CEO Elon Musk in January warned that growth would be "notably lower" this year.

Tesla has lagged other "Magnificent Seven" stocks including Microsoft, Apple, Nvidia, Amazon , Alphabet and Meta Platforms in 2024.

Despite the slump, it has the highest forward price-to-earnings ratio of 52 among the seven companies, as analysts lowered their estimates for earnings.

Their average estimate for earnings in 2024 has dropped by about 10.8% in the past 30 days, LSEG data showed. Still, the average Wall Street rating for Tesla is "hold" as many analysts believe that the demand slump could stabilize later in the year.

"We can concur the price wars in China are brutal however there is a sense from industry checks... that many of these price cuts are starting to subside into spring/summer 2024," Wedbush analyst Dan Ives said.

Tesla has nine bearish ratings - equivalent to "sell" or lower" - among the 48 brokerages covering the stock, the highest since July 2022, according to LSEG data.

Its stock was trading near a 10-month low at $173.45. (Reporting by Medha Singh in Bengaluru; Additional reporting by Sruthi Shankar; Editing by Arun Koyyur)