Jason Doy
Tesla (NASDAQ: Tesla) fell in early trading on Friday after UBS downgraded the electric vehicle giant to a sell rating from neutral.
UBS analyst Joseph Spak and his team noted that Tesla (TSLA) is trading in a bullish direction. Future growth initiatives are expected to decline.
“Tesla is investing heavily in AI, and the technology is making progress, but the investment is expensive, the pace of improvement may slow, and the long-term return is low,” Spak warned. “If the market’s enthusiasm for AI wanes, it could impact Tesla’s multiples,” Spak added.
After crunching the numbers, UBS analysts believe the core auto business is worth between $60 and $90 per share, Tesla’s (TSLA) energy business is worth around $57 per share, and the robotaxi business is worth around $18 per share. This large gap between Tesla’s current trading price and its stock price has led to the new bearish rating on the stock.
UBS has set a $197 price target for the stock based on a 55X forward price-to-earnings multiple.
Tesla (TSLA) shares fell 1.99% In premarket trading after a 8.44% drop on Thursday. The EV stock had gained in 11 straight trading sessions before the drop. Short interest in TSLA is just 3.30% of the total float. Looking ahead, Tesla (TSLA) is scheduled to report second-quarter earnings on July 23. Analysts expect it to report revenue of $24.2 billion and earnings per share of $0.61. The Austin-based company has missed revenue and earnings per share estimates for the past three quarters.