(Bloomberg) — Tesla Inc. (TSLA) was down after UBS Group AG downgraded the stock, citing concerns that the electric-car maker’s shares are rising “too much, too soon” on optimism about its artificial intelligence plans.
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Tesla shares were down 1.6% in U.S. premarket trading as of 4:30 a.m. in New York. The stock fell 8.4% on Thursday, snapping an 11-day winning streak, as Tesla said it would delay the planned unveiling of its robots until October next month to allow teams working on the project more time to build additional prototypes.
The electric-car maker is among the 10 most valuable stocks in the S&P 500 (^GSPC), far outpacing the rest of the tech giant. Before Thursday’s pullback, its shares had surged 44% through Wednesday, the latest rally on bets that billionaire founder Elon Musk can turn the company into an artificial-intelligence powerhouse.
“If market enthusiasm for AI wanes, it could impact Tesla’s multiples,” UBS analysts, including Joseph Spak, wrote in a note, downgrading their rating to sell from neutral.
The downgrade is justified “given the lack of visibility and the risk that growth opportunities over a longer time horizon will materialize (or not materialize at all),” the analysts wrote, noting that the stock is trading at more than 80 times one-year estimated earnings.
UBS’s move reflects growing concerns about the valuations of AI-related companies, evidenced by overnight sell-offs in major tech stocks. Tesla is also facing a weak outlook for electric vehicles, weighing on its sales and profits.
The premium investors attribute to Tesla for its string of initiatives has grown recently due to AI enthusiasm and “one would need to see a bigger opportunity to justify a buy rating,” UBS analysts wrote.
UBS analysts raised their 12-month target for the stock to $147 from $197, implying an 18% decline from Thursday’s close. They used a higher price-to-earnings multiple to arrive at the new target.
-Assisted by Joel Leon.
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