Tesla continues to fall after UBS announcement

Tesla continues to fall after UBS announcement

UBS’s Patrick Hummel cut his rating but raised his stock price target to well above the Wall Street average

Shares of Tesla Inc. extended their corrective selloff on Monday after UBS recommended investors stop buying, saying prices already fully reflect strong demand, and then some.

The stock TSLA, +0.49% fell 0.5% in morning trading, putting them on track to suffer a fourth-straight decline. The electric vehicle giant’s stock has dropped 11.8% since closing at a 10-month high of $293.34 on July 18, which many on Wall Street would say confirms a correction.

UBS analyst Patrick Hummel cut his rating on Tesla shares to neutral, after being at buy for the past 13 months.

“We downgrade to neutral because we think the recent strong share performance fully reflects the strong demand response seen after the price cuts, as well as a solid execution in 2024,” Hummel wrote in a note to clients.

Meanwhile, Hummel raised his price target to $270 from $220. The new target is 10.7% above the average target of the 46 analysts surveyed by FactSet of $244.20.

“Tesla remains the undisputed truly global technology, scale and cost leader in the EV space, with unparalleled software capabilities,” Hummel wrote. “However, for the next 12 months, we think upside risk to consensus earnings is very limited with significant volumes from new product (first Cybertruck, then the affordable model) not kicking in before [the second half of 2024], and with some initial margin-dilutive impact.”

The downgrade comes after Tesla reported second-quarter earnings that beat expectations, but the stock fell as price cuts led to margins contracting more than forecast. Chief Executive Elon Musk assured investors that eventually, full autonomy will boost margins.

Hummel said he still tends to think of autonomy as a “multi-year process” with big financial upside only after full autonomy is reached.

“We continue to see Tesla globally leading the race to affordable electric and autonomous mobility, but on a 1-year view, risk/reward looks balanced,” Hummel wrote.

Despite the correction, Tesla’s stock is still up 110% year to date, while the Global X Autonomous and Electric Vehicles exchange-traded fund DRIV, +0.30% has climbed 34.3% and the S&P 500 index SPX, +0.44% has advanced 18.5%.

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