Tesla stock rating reiterated at Sell by UBS amid EV credit concerns

Investing.com - UBS has reiterated its Sell rating on Tesla (NASDAQ:TSLA) with a price target of $215.00, citing challenging near-term fundamentals for the electric vehicle maker. Currently trading at $332.56 with a P/E ratio of 175x, InvestingPro analysis suggests the stock is trading above its Fair Value, with 16 analysts recently revising their earnings estimates downward.

The investment firm highlighted several headwinds facing Tesla, including the anticipated end of the $7,500 consumer EV tax credit in the United States, which could negatively impact demand. UBS also noted Tesla’s brand faces challenges in Europe while competition remains intense in China. These challenges come as Tesla’s gross profit margins have declined to 17.66%, with revenue growth forecast to contract by 4% in FY2025.

UBS has adjusted its 2026 delivery forecast for Tesla to 1.62 million vehicles, representing 8% year-over-year growth but 18% below the consensus estimate of 1.98 million. The firm also lowered its 2026 earnings per share projection to $1.85 from $2.24.

The expected loss of "a large portion" of Tesla’s EV credit revenue, which UBS describes as "100% margin accretive," is anticipated to weigh on the company’s profitability into next year. UBS acknowledged that Tesla’s "new models" are primarily Model Y variants, which could limit incremental demand.

Despite these concerns, UBS recognized that Tesla’s ventures in robotaxis and humanoids are progressing, though still in their infancy, noting the stock "always remains a battle between what can be and what is." For deeper insights into Tesla’s valuation and growth prospects, InvestingPro subscribers can access comprehensive analysis including 18 additional ProTips and a detailed Pro Research Report, part of our coverage of 1,400+ top US stocks.

In other recent news, Tesla reported second-quarter revenue of $22.5 billion and earnings per share of $0.40, aligning closely with consensus estimates of $22.6 billion and $0.42, respectively. The company’s automotive gross margins, excluding zero-emission vehicle credits, improved to approximately 15%, surpassing analyst expectations of 13.3%. Baird noted stronger-than-expected profitability in Tesla’s Energy business, maintaining a Neutral rating with a $320 price target. Mizuho (NYSE:MFG) reiterated an Outperform rating with a $375 price target, despite concerns over future demand challenges. Barclays (LON:BARC) maintained an Equalweight rating with a $275 price target, highlighting Tesla’s leadership in AI initiatives like Robotaxi and Optimus. Piper Sandler kept an Overweight rating with a $400 price target, describing Tesla’s financial results as "solid." Truist Securities held a Hold rating with a $280 price target, characterizing the Q2 performance as "noisy" but in line with expectations.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.