On Thursday, Tesla shares experienced a decline, dropping by 9.5% as of 11:50 a.m. ET, following a substantial gain the previous day. This decrease is occurring alongside broader market declines, with the S&P 500 and Nasdaq Composite falling by 4.2% and 5.3%, respectively.
UBS has adjusted its price target for Tesla’s stock, lowering it from $225 to $190. The investment bank cited concerns about the impact of trade tensions with China on Tesla’s energy business. Despite Tesla’s manufacturing primarily taking place in the countries where its vehicles are sold, the ongoing trade war involves tariffs affecting Tesla’s supply chain due to cross-border parts and materials. UBS emphasized the potential negative effect on Tesla’s energy business, which was highlighted as a strong performer in the latest earnings report. The bank also noted that it might further revise the target downward depending on Tesla’s upcoming earnings announcement.
Tesla’s high valuation is drawing scrutiny, especially with the complexities introduced by the trade war. The company’s sales have been on a downward trend, and while it has ambitious plans, its primary revenue source remains car sales. Tesla’s market valuation, with a price-to-earnings ratio exceeding 130, aligns more with that of a high-growth software company than a traditional car manufacturer.
Furthermore, Johnny Rice, the author, has disclosed no positions in any mentioned stocks, while The Motley Fool holds positions in and recommends Tesla. The Motley Fool also maintains a disclosure policy.
