(Bloomberg) — Tesla Inc. (TSLA) fell after shares were downgraded by UBS Group AG, which cited concerns that the electric carmaker’s stock has risen “too much, too fast” on optimism about its artificial intelligence plans.
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Tesla was down 1.6% in U.S. premarket trading at 4:30 a.m. in New York. The stock fell 8.4% on Thursday, snapping an 11-day winning streak, as Tesla reportedly delayed the planned unveiling of the robotaxi until next October to give teams working on the project more time to build additional prototypes.
The electric vehicle maker is among the 10 most expensive stocks in the S&P 500 (^GSPC) Index, easily outpacing the rest of the mega-cap tech cohort. Before Thursday’s slump, shares had surged 44% through Wednesday in their latest rally on bets that billionaire founder Elon Musk can transform the company into an AI powerhouse.
“If market enthusiasm for AI wanes, it could impact Tesla’s price-to-earnings ratio,” 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 may not materialize over the longer term (or at all),” the analysts wrote, noting that the shares trade at more than 80 times one-year estimated earnings.
UBS’s move reflects growing concerns about the valuation of companies tied to AI technology, as evidenced by an overnight sell-off in Big Tech stocks. Tesla is also battling a subdued outlook for electric cars, weighing on sales and profits.
The premium investors are placing on Tesla for its range of initiatives has increased recently amid enthusiasm for AI, and “one should see an even greater opportunity to justify a buy rating,” the UBS analysts wrote.
UBS analysts raised their 12-month target for the stock to $197 from $147, implying an 18% decline from Thursday’s close. They used a higher price-to-earnings ratio than before to arrive at the new target.
—With assistance from Joel Leon.
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