Chinese chip stocks jump as Beijing reportedly warns against Nvidia’s H20
On Monday, UBS analysts made a significant adjustment to Tesla’s (NASDAQ:TSLA) financial outlook, reducing the electric vehicle manufacturer’s price target from $259.00 to $225.00 while maintaining a Sell rating on the stock. According to InvestingPro data, Tesla’s stock is currently trading at a P/E ratio of 117.18x, and analysis suggests the stock is fairly valued at current levels. The stock has declined nearly 35% year-to-date, with InvestingPro showing 18 additional key insights about Tesla’s valuation and performance. The revision comes as UBS lowers its delivery forecast for the first quarter of 2025 to 367,000 vehicles, a decrease from the initial 437,000 placeholder following fourth-quarter results of 2024.
The analysts expect a slower current run-rate but anticipate a potential surge in deliveries toward the quarter’s end, possibly driven by increased promotional activities. The new estimate represents a 5% year-over-year decline and a 26% quarter-over-quarter drop, positioning UBS’s forecast 13% below the current Visible Alpha consensus. Tesla’s revenue reached $97.69 billion in the last twelve months, with a modest growth rate of 0.95%, according to InvestingPro data.
UBS cites data from its Evidence Lab, which shows low delivery times for Tesla’s Model 3 and Model Y in key markets, suggesting softer demand. This observation has led to a downward revision of Tesla’s first-quarter auto gross margin excluding credits to 10.3%, a significant fall from 13.6% in the fourth quarter of 2024 and 16.4% in the first quarter of 2024. Recent InvestingPro data shows Tesla’s gross profit margin at 17.86%, with the company maintaining strong financial health as indicated by its current ratio of 2.02 and robust cash position exceeding debt levels. The revised margin stands well below the consensus estimate of approximately 13.5%, which UBS deems overly optimistic, especially in light of the reduced delivery outlook.
The anticipated pressure on the gross margin metric is attributed to changeover and downtime, as previously indicated by Tesla. However, UBS’s projection is further lowered due to the expected decrease in deliveries and the assumption of more promotional activity. As a result, UBS has adjusted its earnings per share (EPS) estimate for the first quarter of 2025 to $0.37, which is 28% below the consensus.
In other recent news, SpaceX’s latest Starship test encountered a significant setback, leading to a rapid unscheduled disassembly during ascent. The Federal Aviation Administration (FAA) has mandated SpaceX to conduct a thorough investigation into the incident, which resulted in debris scattering across the Caribbean and temporary disruptions in air travel. Meanwhile, Tesla has faced mixed analyst ratings, with Erste Group downgrading the stock from Hold to Sell due to challenges in the Chinese market and a perceived outdated product lineup. In contrast, TD Cowen has upgraded Tesla to a Buy rating, citing potential catalysts such as new vehicle launches and advancements in autonomous technology.
Nvidia (NASDAQ:NVDA) has seen positive movement, driven by Broadcom (NASDAQ:AVGO)’s optimistic forecast on AI chip production, which reassured investors about spending on AI computing. Broadcom reported better-than-expected first-quarter earnings, with adjusted net revenue surpassing analyst estimates. Additionally, five Democratic senators have requested the Justice Department to investigate potential ethical concerns involving Elon Musk’s influence on advertisers for the social media platform X. This request follows reports of efforts to increase spending by advertisers on the platform. These developments highlight the varied landscape of challenges and opportunities faced by companies in the tech and automotive sectors.
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