ubs warns of potential 35 percent drop in tesla stock valuation

Tesla's stock has seen a significant increase since Donald Trump's election victory, but analysts at UBS are skeptical about the sustainability of this rally. They argue that the current valuation of Tesla is not supported by its underlying business fundamentals.

UBS Skepticism and Price Target

UBS has maintained a "sell" rating on Tesla shares and set a price target of $226, indicating a potential downside of 35% from its current trading price. The analysts believe that for Tesla to justify its current valuation, the company would need to achieve ambitious growth targets, which they find unlikely. They suggest that the recent performance of Tesla's stock is driven more by market momentum and investor sentiment than by solid business performance.

Caution on Political Optimism

Investor optimism surrounding Tesla has been fueled by the belief that Elon Musk's close ties to the incoming administration will benefit the company. However, UBS cautions that this political optimism may be misplaced. The elimination of the EV tax credit could lead Tesla to implement price cuts on some models, negatively impacting its profitability. The analysts also highlight that Tesla's current valuation reflects an unrealistic growth trajectory and that the stock may be nearing a peak. They note that Tesla's automotive business now constitutes only 12% of its total market valuation, a significant decline from historical levels. In the past, when this metric has dipped below 17%, the stock has typically entered a downward trend.

Signs of Valuation Peak

The UBS report warns that Tesla's stock is showing signs that its valuation may be approaching a near-term peak. The analysts point out that in previous instances when the automotive segment's contribution to the overall market cap fell to around 10%, the company experienced substantial corrections. JPMorgan has also projected a potential downside of up to 48% for Tesla shares, citing concerns about stalled growth in the automotive sector. Analysts are skeptical about Tesla's ability to maintain its rapid growth trajectory in the face of increasing competition and market challenges.

Uncertain Future Growth Prospects

As Tesla faces a rapidly changing market landscape, its future growth prospects remain uncertain. The company's ambitious targets for vehicle deliveries and energy storage capabilities by 2030 will require significant advancements in production and technology. Analysts are closely monitoring these developments, as any signs of stagnation or failure to meet growth expectations could lead to further corrections in the stock price. In the evolving landscape for electric vehicles, investors are advised to critically assess the underlying fundamentals of Tesla's business rather than relying solely on market momentum.

Trending
Subcategory:
Countries:
Companies:
Currencies:
People:

Machinary offers a groundbreaking, modular, and customizable solution that provides advanced financial news and statistical analysis. Our platform goes beyond traditional quantitative analysis, offering users a comprehensive understanding of real-time market dynamics, event detection, and risk analysis.

Address

Waitlist

We’re granting exclusive early access to the first 500 users from december 20.

© 2024 by Machinary.com - Version: 1.0.0.0. All rights reserved

Layout

Color mode

Theme mode

Layout settings