Tesla shares fell on Tuesday amid a drop in their target price by UBS experts – the growth forecast for the next 12 months was reduced from $ 730 to $ 660.
Tesla (TSLA) remains the global leader in electric vehicles, UBS analyst Patrick Hummel said Tuesday. However, the analyst retained a neutral rating and lowered his target price for Tesla shares from $ 730 to $ 660, which is below Tuesday’s price of $ 680.76 at the close of trading. Tesla shares fell amid the news.
The Tesla stock chart shows that the industry leader is currently trading more than 20% below its highs in January.
There are two main reasons for the downturn: increased competition and global chip supply problems.
Analyst Patrick Hummel believes that competitors, especially in the largest electric vehicle market in the world – in China, will influence Tesla’s share price in the short term.
Tesla has already had to cut prices for its cars in the Middle Kingdom several times in order to compete, which leads to a decrease in the company’s gross profit in the region.
In addition, Tesla faced reputational issues in China and the latest misstep by the American automaker was the recall of more than 285,000 vehicles in China due to the safety threat posed by the cruise control function.
While the recall does not include actual vehicle returns as the fixes will be made remotely via an online software update, this is not the kind of news Tesla investors want to hear amid fierce competition in China.
However, long-term investors should keep in mind that despite all the temporary difficulties, Tesla remains the “undisputed leader” in UBS’s EV portfolio.
Tesla’s sales in China also rose 29% in May, according to the China Passenger Car Association, which denied negative forecasts. Tesla shares are up 13% since the data was released on June 8.
At the same time, the decline in the target price of Tesla shares in UBS is in line with the following statement from the Swiss bank analyst: “The momentum of growth in the coming quarters is likely to be more in favor of competitors with a more loaded production pipeline and new product launches.”
In support of its position, UBS raised its target prices for Tesla’s competitors:
the target price for General Motors (GM) shares, with a recommendation “buy”, was increased from $ 75 to $ 79, which is the forecast of growth from the current price of $ 58.83;
the target price for the share of Volkswagen, the leader of electric vehicles in Europe, is $ 357 (300 euros), which indicates high upside potential from the current 216 euros;
The bank also raised its target price from $ 13 to $ 16 for Ford (F) shares rated Neutral.
Other competitors in the fiercely competitive electric vehicle market include South Korean automaker Hyundai, French Renault, and China’s Nio (NIO), BYD, XPeng (XPEV) and Li Auto (LI).
In a recent UBS survey of more than 11,000 consumers in the world’s largest electric vehicle markets, 43% of them are likely to consider buying an all-electric vehicle, up from 37% a year ago.
For the first time ever, all-electric vehicles are preferred over hybrids, according to UBS.
Following the survey, UBS raised its China sales forecast to 2.5 million EVs in 2021 from 1.9 million, assuming EVs will account for 20% of the global auto market by 2025 and 50% by 2030.