Analysts Drop Shocking Bombshell on Elon! (The Numbers Don't Lie)

Goodmorning everyone! 

I hope you’re set to have a great weekend, because we all know Elon ain’t. In the midst of Tesla’s roaring rally built on the backs of AI, our boy Elon just got a bit of a slap from UBS. 

(Source: Tenor) 

Recently, the Swiss banking giant downgraded Tesla from "Neutral" to "Sell," and it's not because they suddenly hate electric cars. No, it’s because they believe Tesla’s stock has been puffed up like a balloon on AI hype, and it might be time to let some air out. 

(Source: Yahoo Finance) 

Wait… AI is overhyped? Ya don’t say…

Of course, while everyone loves to focus on Elon these days, UBS analyst Joseph Spak is the main protagonist (or antagonist for you Elon fanboys) of our story today. In short, Mr. Spak is the one who pulled the trigger on this downgrade - and it’s clear that after crunching all of the numbers, he’s not convinced by the recent surge in Tesla’s stock.

(Source: Giphy) 

The funny thing is, even though he upped the price target to $197 per share, it was still 18% below Tesla’s recent trading price of around $241 at the time. Ouch. 

So what’s the guy seeing that most of us aren’t? Well despite Tesla closing yesterday 2.99% in the green at $248.23 per share, Spak argues that Tesla’s rally has been fueled by a little too much AI optimism.

(Source: Forbes) 

And let’s be real, the optimism has in fact, “been real”. Elon has been out there, loud and proud, proclaiming Tesla as an AI and robotics company. He’s even got the thumbs up from Ark Invest’s Cathie Wood, (Warning, Warning)  who’s all in on the AI future. 

(Source: Bloomberg) 

But UBS isn’t buying the hype—at least not at current prices.

In fact, Spak’s note to clients was pretty blunt to say the least.  He pointed out that Tesla’s stock is trading at over 80 times forward earnings. That’s a crazy high multiple, folks. For context, most companies would kill for a multiple half that size. 

And this isn’t just about AI. Tesla’s core auto business, according to UBS's math, only accounts for $57 per share. Add in the energy business and robotaxi ambitions, and you get another $36. That’s $93 of value, which means the rest of Tesla’s current stock price is pure speculation. UBS calls this "unidentifiable premium" a bit too significant.

(Source: Giphy) 

Keep in mind, this crunching the numbers revelation all comes during the same time that Elon’s robotaxi dreams are hitting a speed bump. As mentioned in one of our previous articles, Tesla’s much-hyped robotaxi debut has been pushed back - initially pegged for next month, but now it’s looking more like October. 

(Source: Yahoo Finance) 

So obviously, this delay throws a wrench in the works, especially since the robotaxi project was supposed to be a major catalyst for the stock going forward. 

However, while Spak and his UBS gang, acknowledge that Tesla is indeed making some strides in AI, the road ahead is long and expensive. Meaning, if the market’s love affair with AI cools off, Tesla’s stock could take more of a hit than it already has with all the negative news.

(Source: Giphy) 

Now before we all point our picks and forks at UBS, it’s not just them thinking that Tesla is a bit too much bang, and not enough buck. Other analysts over at JP Morgan and Bloomberg have started singing similar tunes as the recent AI-fueled rise in Tesla’s share price has made some experts nervous. 

The fear, mainly, is that the stock has run up too quickly, on expectations that might not materialize in the near term. So in reality it does make sense…

(Source: MakeAMeme)

But let’s be real for a second. Tesla has no doubt had an impressive run. Battery storage sales are up, vehicle deliveries have beaten expectations, and the robotaxi plans had investors drooling. But when you bring things back to reality, the enthusiasm might have gone a bit overboard. 

So for all you Tesla investors out there, even though the downgrade is something to get your pissed off juices flowing, the downgrade isn’t a death knell at all. It’s just a bit of a wake-up call with precaution.

(Source: Giphy) 

The stock might have gotten ahead of itself riding on the AI wave, so for some, it may be a good reason to take a breather and reassess its role in your portfolio. Obviously, Tesla’s long-term story could still be golden, but in the short term, caution is the name of the game.

So as we keep an eye on those robotaxi developments, only time will tell whether the AI hype can keep the stock roaring or not. But either way, while Elon may not have a great weekend, you bet your tail I will... and I sure hope you do as well! Until next time...  

Stocks.News holds positions in Tesla as mentioned in the article.