Tesla stock lacks a meaningful upside: UBS analyst

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Written on Jul 24, 2023

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UBS analyst downgraded Tesla Inc to "underweight" on Monday.
Patrick Hummel said the risk-reward is balanced at current price.
Tesla stock is currently up about 150% versus the start of the year.

It’s time to move to the sidelines now that Tesla Inc (NASDAQ: TSLA) has rallied about 150% year-to-date, says UBS analyst Patrick Hummel.

Tesla stock is fairly valued

On Monday, he downgraded the electric vehicles behemoth to “underweight” and announced a price target of $270 that’s roughly in line with where it’s trading at writing.

Tesla stock has rallied this year partially because the multinational lowered prices more than once to boost demand. But Hummel said today in his research note:

We think the recent strong share performance fully reflects the strong demand response seen after the price cuts, as well as a solid execution in 2024.

Last week, Senator Elizabeth Warren urged the U.S. Securities & Exchange Commission to investigate Tesla as Invezz reported here.

Hummel still sees Tesla as a leader

In its latest reported quarter, the Nasdaq-listed firm saw its car business take a 70 basis points hit to gross profit.

Patrick Hummel, in his note to clients today, also noted higher operating expenses and worse-than-expected free cash flow. Still, his view on Tesla stock is based primarily on valuation, he wrote.

We continue to see Tesla globally leading the race to affordable electric and autonomous mobility, but one a 1-year view, risk/reward looks balanced.

It is also noteworthy that the EV giant recently confirmed that it has built its first Cybertruck at Giga Texas. But the UBS analyst expects autonomous driving to be the key to better margins and to warrant higher valuation.