Tesla
has been getting it right on its pricing, production, and technology. However, that’s not enough to make the shares attractive at the moment, according to UBS analysts led by Patrick Hummel.
The analysts on Monday downgraded their rating on
Tesla
(ticker: TSLA) stock to Neutral from Buy, even while raising their target price to $270 from $220.
The recent run-up in Tesla’s share price is the culprit. While Tesla shares were down 1.7% in premarket trading to $255.63, they have more than doubled this year and Hummel and his colleagues suggested that the electric-vehicle maker’s likely progress next year already is priced in.
“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 and his colleagues wrote.
Tesla’s recent second-quarter earnings report dispelled some concerns about margins for the UBS analysts and validated the company’s price cuts. However, Hummel said that a further step-change in margins likely will rely on progress made on self-driving technology, with full self driving (FSD) still several years away.
“Tesla’s new Dojo supercomputer could prove to be a game-changer for FSD software iterations, but we still tend to think about autonomy as a multi-year process with big financial upside only when full autonomy is reached,” the analysts wrote.
Write to Adam Clark at [email protected]
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