As Tesla's stock price soars, UBS throws out a bearish research report: The surge relies on "animal spirits," recommending to sell

According to the Zhitong Finance APP, a team of analysts from the international banking giant UBS Group has warned in a report that the stock price of Tesla (TSLA.US), led by the world's richest man Elon Musk, surged after the U.S. presidential election, driven almost entirely by the "animal spirits" of the U.S. stock market rather than actual improvements in its business fundamentals. Despite Tesla's stock price soaring over 40% recently, UBS remains firmly bearish on Tesla, reiterating a "sell" rating, the most negative rating, with a target price of only $226 for the stock. The UBS analyst team also issued warnings regarding policies that could potentially benefit the company.

"Animal Spirits" is a term in economics and finance, originally introduced by economist John Maynard Keynes in his classic 1936 work "The General Theory of Employment, Interest, and Money," where Keynes described it as "the emotional and confidence factors of humans in economic activities, specifically the psychological forces driving investment, consumption, and economic decisions," emphasizing that these forces are often based on irrational factors. In modern economics, "animal spirits" are used to explain the "irrational factors" behind market fluctuations, economic cycles, and other phenomena, especially when traditional economic models cannot fully explain them. For example, the phenomenon of short-term surges and drops in the stock market.

Although there have been some potentially very favorable electric vehicle policy proposals for Tesla's FSD (Full Self-Driving) and Robotaxi since Donald Trump, who has Musk's full support, won the U.S. presidential election, the UBS analyst team, led by Joseph Spak, wrote that these unrealized changes are not entirely positive for the company.

In just one week after Trump's victory, Tesla's stock price has fully broken through the long-elusive $300 mark. Since Trump announced his victory in the U.S. presidential election, the company's stock price has risen over 40%. As of last Friday's U.S. stock market close, Tesla's stock price rose 3.8% to $352.560. Musk has been pouring huge sums of money into supporting Trump since the "smart king" Trump faced assassination attempts, making him a global billionaire who is resolutely "all-in" on Trump. Wall Street's top investment firm Wedbush Securities, known as a "die-hard fan" of Tesla, raised its 12-month target price for Tesla from $300 to $400 after Trump's victory.

For investors bullish on Tesla's stock price and Musk fans, Trump's return to the White House, along with his announcement that Musk will lead the "U.S. Government Efficiency Department," will fundamentally change the narrative logic for Tesla and Musk's companies in the coming years regarding artificial intelligence, autonomous driving, and Tesla's AI supercomputing system. They believe that the long-standing regulatory challenges Musk has complained about, such as "federal government inefficiency" and the delayed regulatory review of Tesla's FSD and Robotaxi, may usher in a "qualitative change" in accelerated reviews However, the UBS led by Spark poured cold water on the aforementioned optimistic expectations and the so-called "animal spirit" of Tesla. The UBS analysts led by Spark wrote that, for example, the cancellation of the tax credit for purchasing electric vehicles could force Tesla to significantly lower prices. They also pointed out that although the regulatory environment under the Trump administration may be more favorable for cutting-edge technology companies, including FSD technology and autonomous vehicles, Tesla is not yet ready to leverage the relaxed rules to launch a Robotaxi service network compared to competitors like Waymo.

"The rise in Tesla's stock price is mainly driven by animal spirits, along with some momentum from technical factors," the UBS analyst team led by Spark wrote in their report. They reiterated a "sell" rating for the stock in their latest research report, although they slightly raised their target price for Tesla from $197 to $226. The UBS analysis team noted in the report that the market pricing for the expectation that "the federal government may accelerate the approval of Robotaxi" is expected to bring a valuation increase for Tesla of only $100 billion, rather than the more than $300 billion currently presented.

Tesla's stock price closed at $352.56 last week, and since election day, Tesla's market value has increased by an astonishing $350 billion, with Musk's wealth also surging alongside Tesla's stock price. In pre-market trading on Monday, "animal spirits" continued to drive Tesla's stock price, which rose by 2.6% to $361.85 at one point