Tesla Shares Slide After UBS Highlights Rally Driven by 'Animal Spirits'

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Tesla stock (TSLA) saw a dip on Monday after a strong rally, with UBS analyst Joseph Spak attributing the surge to “animal spirits” rather than any fundamental shifts at the company. Spak noted that Tesla’s stock has jumped by around 40% since the election, adding over $350 billion to its market capitalization. While some of President-elect Donald Trump's policy proposals could benefit Tesla, others could negatively impact the company’s fundamentals more than the stock's current surge suggests.

Spak emphasized that the rise in Tesla's stock is largely driven by market momentum, a pattern the company has experienced before. Despite Tesla’s stock reaching multi-year highs after Trump’s election win, UBS reiterated a rare Sell rating for the company with a price target increase from $197 to $226. 

Tesla’s rally was fueled by Musk’s strong support of Trump, which led to his inclusion in policy discussions and Trump’s improved stance on electric vehicles. However, some policies, such as the potential removal of the federal EV tax credit, could harm Tesla’s competitors more than Tesla itself. While the removal of these credits may not be an outright negative for Tesla, Spak pointed out that demand for Tesla’s vehicles could depend on factors beyond the tax credits, such as pricing adjustments.

One of the more optimistic views for Tesla post-election was the possibility of a more favorable regulatory environment for the company’s robotaxi service. While Spak acknowledged that an easier regulatory landscape could benefit Tesla, he warned that the real challenge lies in the technology itself. Full Self-Driving (FSD) is still improving but remains far from ready for widespread deployment of autonomous robotaxis.

Spak raised his price target to $226, based on a 57 times forward price-to-earnings ratio for 2026, but noted that this target remains below Tesla’s current stock price. He cautioned that, while he appreciates the narrative driving the stock's recent rally, he remains unconvinced from a fundamental perspective, particularly for the long term. Despite this, Tesla’s 40% rally in less than a month doesn’t seem to be impacted by these concerns.

Paraphrasing text from "Reuters" all rights reserved by the original author.