Tesla’s stock (TSLA) recently experienced an 8% drop to $242 per share, mirroring a broader market downturn fueled by tariff concerns. UBS analyst Joseph Spak reiterated a Sell rating and reduced the price target from $259 to $225, citing anxieties over near-term demand for the Model 3 and Model Y. This contrasts with the consensus price target of $239, as reported by Yahoo Finance.
Spak acknowledges Tesla’s long-term potential in AI, particularly with robo-taxis and humanoid robots. However, he believes these prospects are distant and already factored into the company’s premium valuation. Currently, Tesla trades at a 90x price-to-earnings ratio based on 2025 consensus earnings per share estimates, a figure Spak deems excessive. He projects a 5% year-over-year and a significant 26% sequential decline in Tesla’s first-quarter deliveries, a figure 13% below consensus.
This bearish outlook adds to the mounting challenges faced by Tesla investors. The stock has plummeted 40% year-to-date, making it the worst performer among the “Magnificent Seven” tech giants, which include Apple (AAPL), Amazon (AMZN), Nvidia (NVDA), Google (GOOG), Microsoft (MSFT), and Meta (META). February alone saw a 28% decline for Tesla compared to a slight dip for the S&P 500. March also witnessed a 7% decrease for Tesla against a 3% decline for the S&P 500.
Concerns extend beyond Elon Musk’s association with political figures. Alleged attacks on Tesla stores contribute to negative sentiment, although their impact remains unclear. Sales figures paint a concerning picture. In February, Tesla sold only 26,677 vehicles in China, representing an 11.16% year-over-year and a 20% month-over-month decrease, according to the China Passenger Car Association. The Australian Electric Vehicle Council reported a staggering 72% year-over-year plunge in Tesla’s February sales.
In the US, prices for used Tesla models, including the Cybertruck, Model 3, Model S, Model Y, and Model X, are experiencing a downward trend. Intensified competition from General Motors (GM) and Ford (F) in the electric vehicle market, coupled with some consumers opting for hybrid vehicles, contributes to this pressure. CarGurus data reveals a 4% average price decline for Teslas over the past 90 days, with Cybertrucks and Model S leading the decline.
Furthermore, new tariffs imposed by the previous administration threaten to increase costs for Tesla and its competitors. These tariffs exacerbate the existing challenges posed by declining demand and heightened competition.
In conclusion, Tesla faces significant headwinds, including declining demand, increasing competition, and potential tariff impacts. While the company’s long-term prospects in AI remain, these are long-dated opportunities. The current valuation appears inflated, justifying UBS’s bearish outlook and contributing to the negative sentiment surrounding Tesla stock.
