The shares of Tesla (TSLA -9.96%) are experiencing a significant decline this Thursday. The electric vehicle manufacturer has seen its stock plummet by 9.5% as of 11:50 a.m. ET, following a substantial increase of double digits just the day before. This drop comes amid a broader market downturn, with the S&P 500 and Nasdaq Composite indices falling by 4.2% and 5.3%, respectively, highlighting a challenging environment for investors in the tech and automotive sectors.
In a recent report, UBS has revised its price target for Tesla stock downwards, reflecting increasing concerns regarding the company’s energy business in China, which has become a focal point for analysts and investors alike.
UBS Predicts Further Declines for Tesla Stock
Analysts working at the investment bank UBS have lowered their price target for Tesla shares from $225 to $190. This adjustment is largely attributed to the adverse effects of Trump’s tariffs, particularly those imposed on China, and the subsequent retaliatory measures that are creating turmoil within Tesla’s supply chain. While it is true that a significant portion of Tesla’s manufacturing occurs within the countries where the vehicles are ultimately sold, many essential parts and materials still cross international borders during production.
UBS expresses heightened concern regarding how the intensifying trade war with China may adversely affect Tesla’s energy business—one of the few positive highlights from its most recent earnings report. Although the new price target of $190 indicates a notable decline from the current stock price, UBS cautioned that further revisions could be necessary depending on the outcomes of the company’s upcoming earnings announcement.
Understanding Tesla’s High Valuation Amid Sales Challenges
Even in the absence of complications arising from the trade war, Tesla has been facing a decline in sales. Despite the company’s ambitious plans for expansion, the vast majority of its revenue continues to derive from automotive sales. With a staggering price-to-earnings ratio (P/E) exceeding 130, the market is currently valuing Tesla more like a high-growth software company rather than a traditional automobile manufacturer, leading to questions about its sustainability in the competitive automotive market.
Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
