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Tesla Stock: Why UBS Raised Its Target Price

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Jul. 16 2019, Updated 3:10 p.m. ET

Tesla

In this series, we have discussed the possible reasons for Tesla’s (TSLA) moves to cut its vehicle prices in China and acquire trucking companies. Tesla surprised most analysts by reporting profitability in the third quarter. However, many of the analysts still question Tesla’s ability to sustain its profitability in the coming quarters. Let’s take a look at what UBS analyst Colin Langan, a well-known Tesla bear, said about the company in his recent note.

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UBS raised Tesla’s target price

On November 20, Langan raised the target price on Tesla stock by $40 to $230 from $190 earlier. According to a Financial Times report, “UBS teamed up with a group of engineers and discovered that the Panasonic batteries produced in Tesla’s Gigafactory are 20 percent more cost-efficient than the next best on offer from LG Chem.” Tesla batteries are cheaper than its peers, which could act as a competitive advantage for the company. The new findings could be why UBS increased the target price on Tesla stock.

Interestingly, Langan questioned Tesla’s ability to become profitable in the near future before the company reported its third-quarter results. Earlier this year, in a Reuters report, Langan noted that “We’re very worried about quality and if you read the reports online there’s significant quality issues. They still haven’t proven they can produce these profitably. The math is very challenging in getting to a sustained profit.”

Despite Tesla’s target price upgrade, UBS still recommends a “sell” on Tesla. As of November 23, UBS’s target price on Tesla reflected 29.4% downside from its market price of $325.83.

In the fourth quarter, Tesla has increased 23.1%. Other auto companies (XLY) including Ford (F), General Motors (GM), and NIO (NIO) were trading with a -1.3%, 6.7%, and 6.9% change in the fourth quarter, respectively.

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