Tesla (NASDAQ:TSLA) shares have had a big runup since Trump’s election win and really, it’s not all that surprising. Given Elon Musk’s unequivocal support and the role he stands to play in the new administration, investors have evidently felt the company is set to benefit under the new regime.
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As such, says UBS analyst Joseph Spak, “From a narrative perspective, especially if one were valuation agnostic, we get it.”
Spak notes that since Trump’s win, some policy proposals that have emerged look favorable to Tesla. “For instance,” Spak went on to explain: “1) removal of EV consumer tax credits hurts TSLA’s US competition more than TSLA, so they are relative winners and a wider gap could open over time; 2) regulatory environment could be more favorable for AI ventures such as robotaxi (national AV framework); 3) Autopilot/FSD investigations could go away.”
That said, all those points come with caveats. For one, the removal of consumer tax credits isn’t entirely positive for U.S. EV demand, including Tesla. And while Tesla’s upcoming new models or refreshes may help boost interest, past pricing adjustments (excluding tax credits) have only managed to “stabilize demand.” Without credits, further price cuts might be required, as suggested by recent demand incentives, like Model Y lease reductions and free Supercharging/FSD offers for North American customers.
Meanwhile, in China, competition remains intense with increasingly competitive models, and European automakers are likely to “push more EVs” next year.
On the robotaxi front, while looser federal regulations might seem promising for Tesla, experts note there aren’t actually any restrictive federal AV rules to ease. Any progress would still face a regulatory tug-of-war between states and the federal government, and it wouldn’t resolve the technological hurdles of achieving fully autonomous driving.
“We continue to believe that FSD is improving,” Spak opined, “but the product is not ready for wide scale robotaxi deployment. Thus, the rise in Tesla stock is mostly driven by animal spirits/momentum (which has happened multiple times in TSLA’s history).”
With this in mind, Spak tells investors to seriously think about “what one needs to believe to add to TSLA positions at current levels.”
Based on the analyst’s valuation framework, the Auto and Energy segments are worth approximately $52 per share. This implies that at the present share price, Tesla’s other ventures – such as AI, robotaxis, and Optimus – are being valued collectively at around $1 trillion.
“We understand that the market increasingly views TSLA as an AI play, not an EV player, but when the value you can more tangibly attribute to the auto business hits the recent average (~17%), the stock tends to enter a downward channel,” Spak summed up.
Against this backdrop, Spak rates Tesla shares a Sell, while his $226 price target implies a 33% downside from current levels. (To watch Spak’s track record, click here)
The Street’s average price target is only slightly more forgiving; at $233.67, the figure suggests a 12-month decline of 31%. Based on 14 Holds, 11 Buys, and 9 Sells, the analyst consensus rates TSLA stock a Hold (i.e. Neutral). (See Tesla stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
