UBS analyst Joseph Spak has revised Tesla’s (TSLA) price target amid concerns over the market’s valuation of the company’s artificial intelligence (AI) initiatives.
In an investor note on November 25, Spak maintained a ‘Sell’ rating for the stock while raising the price target to $226, up from $197.
The analyst questioned the market’s current valuation of Tesla’s AI ventures, such as robotaxis and Optimus, which he estimates are being priced at nearly $1 trillion.
Picks for you
In his valuation model, Spak emphasized that Tesla’s auto and energy businesses account for roughly $52 per share, suggesting the remaining premium comes from speculative AI expectations.
He also pointed out that when the tangible value of Tesla’s auto business approaches 10% of the overall valuation, the stock has historically experienced sharp downward corrections of 30-70%. Currently, this figure stands at 12%.
“We understand that the market increasingly views TSLA as an AI play rather than an EV player. However, when the value you can tangibly attribute to the auto business reaches the recent average (~17%), the stock tends to enter a downward channel,” he said.
Contrasting outlook on TSLA’s AI inroads
Spak’s outlook contrasts with Wedbush Securities’ Dan Ives, who believes the electric vehicle (EV) manufacturer is ‘the most undervalued AI name in the market,’ citing the company’s full self-driving (FSD) technology advancements.
According to Ives, Tesla’s progress in the AI space could potentially represent a $1 trillion valuation for the company. He also anticipates that the EV giant will benefit under a Donald Trump administration, which he expects will focus more on FSD at a time when CEO Elon Musk has confirmed the integration of AI into driving technology.
Meanwhile, on November 12, Morgan Stanley (NYSE: MS) reiterated its ‘Buy’ rating for Tesla shares, citing its leadership in AI and autonomous technology as key factors.
Analyst Adam Jonas pointed to the Texas-based firm’s strong position to benefit from policy changes despite unclear federal regulations on self-driving cars.
To this end, Tesla could be relieved, considering that reports indicate Trump’s transition team is seeking to ease federal laws regarding self-driving vehicles.
With Musk on the Trump team, enacting favorable FSD regulation could be easy. Before the November polls, the executive had made clear his intentions to push for federal-level regulation of FSD, moving away from the current state-level framework.
At the same time, ongoing investigations into Tesla and Musk’s companies, including probes into fatalities involving FSD, will also play a central role in influencing the technology regulation.
Elsewhere, TSLA might also face additional headwinds, particularly as the Trump administration has signaled plans to scrap federal EV tax credits. Despite this, market experts remain confident in Tesla’s dominant position, which they believe will enable it to navigate such an environment.
TSLA stock price analysis
By press time, TSLA shares were valued at $352.70, up less than 0.1% since the last trading session. Tesla’s stock rose 3.77% over the past five days to $352.47, nearing its 52-week high of $361.93.
However, TSLA stock price needs to hold firm above $350 to validate this movement.
Featured image via Shutterstock
