UBS: Tesla still overvalued, Musk’s call may sway market

Investing.com -- UBS analysts told investors in a note Monday that Tesla (NASDAQ: TSLA) remains “fundamentally overvalued” heading into its second-quarter results, even as expectations of a sector-wide beat on production and FX gains provide near-term support for auto stocks.

In a broad preview of the U.S. autos, auto-tech, and parts space, UBS said, “We expect 2Q25 results to largely beat expectations on better production and FX.”

However, despite the earnings momentum, the firm remains cautious. “There has been a ~20% re-rating, on average,” since March, UBS noted, warning that “core issues that existed pre-tariff mostly remain.”

On Tesla specifically, UBS highlighted regulatory risk and policy uncertainty. “We see real risk to regulatory credit revenue for both TSLA and RIVN as well as demand with removal of EV credits,” the analysts wrote.

Though the third quarter “could have a last gasp and pulled forward demand,” they believe underlying valuation concerns persist.

Still, sentiment and CEO commentary could drive near-term volatility. “We believe TSLA remains fundamentally overvalued, but the price reaction will depend on Musk’s call comments,”

UBS suggests that guidance tone and policy outlook could matter more than headline numbers.

For Tesla’s second quarter earnings, UBS expects in-line earnings per share of $0.43, while it models auto gross margins (excluding credits) of 14% compared to the Street consensus estimate at 13.5%. However, the bank acknowledges that it may move higher post-delivery beat.

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