Tesla shares moved lower in early afternoon trading Monday, trimming the stock's impressive post-election rally, after a top Wall Street analyst boosted his price target while adding a warning about its near-term performance.
Tesla (TSLA) shares have added around $350 billion in market value since Election Day, as investors bet that CEO Elon Musk's support of President-elect Donald Trump, as well as his role in leading a panel tasked with identifying government spending cuts, would boost the automaker's broader profit outlook.
Tesla could benefit from relaxed regulation on self-driving technologies under the Trump administration as it rolls out its fleet of robotaxis over the coming year, and it possibly could see its upstart electric-vehicle rivals suffer if the tax credits introduced by outgoing President Joe Biden are removed.
The stock was also supported prior to Trump's election by stronger-than-expected third quarter EV-delivery data and better overall profit, as well as a bullish outlook from Musk when he spoke with investors on the October conference call.
"To take a bit of risk here, I think it's 20% to 30% vehicle growth next year (is a rough estimate), notwithstanding negative external events, like if there's some force majeure events, like some big war breaks out or interest rates go sky high or something like that," Musk said last month.
"We can't overcome massive force majeure events. But I think with our lower-cost vehicles with the advent of autonomy, something like a 20% to 30% growth next year is my best guess," he added. "And then Cybercab reaching volume production in 2026."
'Animal spirits' drive Tesla stock
The divergence between Tesla's legacy auto business, however, and the market's increasing focus on Musk's AI and robotics ambitions could lead to a near-term correction in the stock, according to UBS analyst Joseph Spak.
Spak, who maintained a 'sell' rating on Tesla, nonetheless lifted his 12-month price target by $29 to $226 a share, amid what he called an "animal spirits/momentum" drive over the past month an a longer-running "Tesla premium."
That premium, Spak says, is intertwined with Tesla's robotaxi effort but is "difficult to value, so we rely a little on the 'collective wisdom of markets."
"Over the past two years, on average, the market has assigned nearly ~$560 billion of value (~$162 per share) to all ex-auto initiatives," Spak said. "Given the more positive sentiment around Tesla and [artificial intelligence]," he and his team are reading to peg that today at around $700 billion.
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That leads Spak to worry about where Tesla stock could head over the coming year.
"We urge investors to think about what one needs to believe to add to Tesla positions at current levels," Spak wrote.
"In our framework, the Auto and Energy businesses are worth ~$52/share, which implies that at current levels, everything else at Tesla (AI, robotaxi, Optimus, etc.) is being valued at ~$1 trillion.'
Morgan Stanley analyst Adam Jonas in fact has long argued that Tesla is based on the host of other business dynamics tied to the sales of its electric vehicles. These include licensing its driver-assistance system, its broader network and mobility services, as well as its battery, energy and insurance divisions.
He's also said that Tesla's Dojo supercomputer, which is powered by artificial-intelligence technologies, could add more than $500 billion to Tesla's market value "through a faster adoption rate in mobility (robotaxis) and network services (software as a service)."
Spak at UBS cautioned, however, that as the market "increasingly views Tesla as an AI play rather than an EV player," its movements could be tied to the value of the group's current profit center, as opposed to its longer-term ambitions.
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"When the value you can tangibly attribute to the auto business reaches the recent average (~17%), the stock tends to enter a downward channel," Spak said. "Currently, the value we can attribute to the auto business is ~12%. The lows we've observed have been ~10%."
"The prior two times this metric hit ~10%, we saw corrections of >30% and >70%," he concluded.
Tesla shares were last marked 1.5% lower in afternoon Monday trading and changing hands at $347.33each, a move that trims the stock's six-month gain to around 97%.
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