UBS analysts, led by Patrick Hummel, have downgraded their rating on Tesla’s stock (TSLA) from Buy to Neutral, despite raising their target price from $220 to $270. This change comes as Tesla’s share price has experienced a significant run-up, with the company’s shares more than doubling this year. As a result, Hummel and his colleagues believe that the electric-vehicle maker’s projected progress for next year is already priced in.
While UBS analysts acknowledge Tesla’s position as a global leader in affordable electric and autonomous mobility, they suggest that the current risk/reward balance on a 1-year view is relatively neutral. Tesla’s recent second-quarter earnings report allayed some concerns about margins, as it validated the company’s price cuts. However, the analysts note that further improvements in margins will likely depend on advancements in self-driving technology, with full self-driving (FSD) still several years away.
UBS analysts are particularly interested in Tesla’s new Dojo supercomputer, which they believe can be a game-changer for FSD software iterations. Nevertheless, they caution that achieving full autonomy will be a multi-year process with significant financial upside only once this goal is reached.