UBS continues to "aggressively buy" Tesla: Stock price has overvalued AI, far exceeding reasonable valuation

The market's high expectations for Tesla's AI projects such as autonomous taxis and humanoid robots have once driven its stock price up significantly. However, UBS believes that the profit return of Tesla's AI projects is still far away, but the market has placed overly high expectations on its development potential, leading to its stock price far exceeding its fair value.

On July 24th, UBS analysts Joseph Spak, Patrick Hummel, and Alejandro Nuno released a report reiterating a "sell" rating for Tesla.

Musk stated on Tuesday that Tesla's value lies mainly in its autonomous driving technology, but UBS pointed out that the challenge lies in the unclear timeline and probability of success.

UBS: Not Optimistic

Currently, Tesla is committed to developing AI projects such as autonomous taxis and Optimus humanoid robots, and the stock price has already factored in many AI expectations.

UBS believes that the returns on these plans are still far away and difficult to evaluate, so the market's focus has shifted back to the reality of the automotive business. However, Tesla's vehicle delivery volume has declined for the second consecutive quarter.

Based on the price-earnings ratio forecast for Tesla from the fourth quarter of 2025 to the third quarter of 2026, UBS has set a target price of $197.

Tesla's adjusted earnings per share are $0.52, lower than UBS's expected $0.65 and the market's expected $0.62. UBS analysts believe that even if Tesla's earnings per share increase by about $1 from the current level, its price-earnings ratio will still exceed 75 times.

UBS also pointed out that only about $74 of Tesla's current stock price can be attributed to its core automotive and energy business, indicating that Tesla's stock already includes expensive option pricing. When market confidence in Tesla's AI projects wavers, the stock will further decline.

It is worth noting that Tesla has delayed the planned launch of Robotaxi, as mentioned in UBS's previous report:

It is still too early to achieve meaningful robot taxi operations in the United States, and it may not be realized within this decade. Under a pessimistic assumption, the robot taxi business will not bring any value to Tesla.

Furthermore, UBS also highlighted that the overall global economic slowdown and discretionary spending constraints remain key risks for automotive production and Tesla's stock.

Tesla's Performance Falls Short of UBS Expectations

On Tuesday, Tesla disclosed its second-quarter performance, with the financial report showing that despite revenue growth, its automotive business is facing pressure:

Revenue was $25.5 billion, a 2.3% year-on-year increase, exceeding market expectations by 2 percentage points but lower than UBS analysts' expectations by 1%;

Automotive revenue was $19.9 billion, a 6.5% year-on-year decrease, exceeding market expectations by 1 percentage point but lower than UBS analysts' expectations by 1%, with $890 million coming from regulatory credit revenue, higher than UBS's expected $400 million and the market's expected $430 million; Due to price cuts, Tesla's car gross margin (excluding regulatory credits) fell to 14.6%, the lowest level since the first quarter of 2019.

On July 25th local time, Tesla closed at $215.99 per share, down 12.33%.