UBS Group has always been hypocritical, saying one thing and doing another: Those who shoot should not be loud, quietly enter the village.

$Tesla (TSLA.US)$

ubs group increases its holdings in Tesla:

UBS Group AG is a multinational investment bank and financial services company established in Switzerland. UBS Group has two headquarters, located in Zurich and Basel, Switzerland; as the largest Swiss banking institution globally, UBS Group has offices in major financial centers around the world. UBS Group is known for its strict client data confidentiality policy and banking secrecy culture.

With the rise of the Swiss banking industry, the predecessor of UBS Group, Winterthur Bank, was established in 1862. By 1890, the Swiss Bank Corporation evolved into a private banking group; under Switzerland's international neutral policy environment, the Swiss Bank Corporation experienced significant growth. In 1912, Winterthur Bank merged with Toggenburger Bank to become United Bankshares, rapidly expanding thanks to the bank secrecy provisions stipulated in the Swiss Federal Banking Act. After decades of competition, Swiss Bank Corporation and United Bankshares merged in 1998 to form "UBS Group." At the beginning of the 21st century, the respective rise of UBS Group and Credit Suisse in Switzerland confirmed their duopoly in the private customer market. UBS Group suffered significant losses in the 2008 subprime financial crisis due to the failure of the asset rescue program, followed by a $2 billion trading loss in 2011 due to the rogue trader scandal. In 2012, UBS Group redefined its wealth management business and limited its sales operations.

In addition to private banking, UBS Group also provides asset management, wealth management, and investment banking services to individuals, companies, and institutional clients, offering global services. UBS manages the world's largest private wealth, with half of the billionaires globally as its clients. While UBS Investment Bank has reduced its proprietary trading businesses, it is still considered one of the 'global large-scale investment institutions' and a major market maker. UBS has built numerous underground vaults, bunkers, and storage facilities near the Swiss Alps and internationally to store the gold bars it controls. Due to its bank secrecy policies, UBS has been a primary target of tax evasion investigations by authorities in countries such as the USA, France, Germany, Israel, and Belgium. According to the 2018 Financial Secrecy Index, UBS's main business locations in Switzerland and the USA ranked first and second respectively. With its significant market share, UBS Group has become a systemically important financial institution and a universal bank in multiple countries. At the end of 2016, UBS established a blockchain technology research lab in London to advance its cybersecurity and encryption for client activities.

At the end of January 2020, UBS officially released its 2019 financial report. At the end of 2019, UBS announced an operating profit of $28.889 billion, a 4.3% year-on-year decrease. Pre-tax profit decreased by 7% to $5.577 billion year-on-year. Shareholder net income attributable to UBS decreased by 5% to $4.304 billion.

UBS Group has gained a large market share in the banking sector due to its capital strength, confidentiality policies, and banking discretion, as well as high brand loyalty. Similarly, it has also faced criticism for facilitating tax non-compliance and offshore finance. On October 18, 2019, UBS expressed willingness to pay fines of up to tens of millions of euros as part of a settlement agreement to end an anti-money laundering investigation by Italian authorities. UBS was accused of aiding cross-border tax fraudsters in concealing their assets in Switzerland. According to Italian law, this settlement agreement does not constitute an admission of guilt but was presented to the court by UBS after reaching an agreement with Italian prosecutors in July. Previously, UBS had paid 0.101 billion euros to settle another investigation by Italian tax authorities.

Ubs Group poured cold water on Tesla: core autos business accounts for only 12% of the market cap, the remaining 1 trillion market cap is like the vast ocean

ubs group stated that the phenomenon of 'autos business market cap falling below average level' has only occurred twice in the past four years, bringing more than 30% and 70% pullbacks to Tesla's stock price. In addition, Tesla's current expected pe has reached 100 times, far exceeding the average level of the past two years. Investors who want to continue to increase their shareholding in the stock need to have great conviction.

After the US election day, Tesla's stock price has already risen by about 40%, with the company's market cap reaching 1.1 trillion US dollars at one point.

Analysts Joseph Spak, Alejandro Nuno, and Zachary Walljaspe from UBS Group warned in their research report released on November 25th that in Tesla's recent stock price surge, sentiment-driven factors are more dominant than fundamental drivers, and investors need to be cautious.

UBS Group believes that although Tesla is transitioning itself into an AI company, the auto business remains the company's most important profit source. The current weight of this business in the company's total market cap has dropped below recent average levels, which could likely trigger a "downward channel" in stock price.

The higher you stand, the harder you fall?

The report indicates that the recent sharp rise in Tesla's stock price is mainly attributed to the market's optimistic expectations for policy changes after Donald Trump became President of the USA, driven more by emotions rather than underlying fundamentals.

From a valuation perspective, the market's positioning of Tesla has shifted from an electric car company to an AI company:

In our framework, the per-share value of Tesla's automotive and energy business is about $52, while based on the current stock price, the valuation of Tesla's other businesses (AI, robotaxi, and Optimus, etc.) has reached $1 trillion. This implies that Tesla is seen as a participant in the field of artificial intelligence, rather than a traditional electric vehicle manufacturer.

The report states that currently Tesla's automotive business accounts for only 12% of the total market cap, having touched a low of 10% at one point.

UBS also mentioned that whenever the proportion of the core automotive business's market cap reaches the recent average level (about 17%), the stock price tends to enter a "downward channel". This has only happened twice in the past four years, bringing about corrections of over 30% and 70% to Tesla's stock price.

With Tesla's valuation continuing to soar, whether the automotive business can bring the expected profitability to the company remains an unknown.

The report mentions that starting from 2022, Tesla's stock price corresponding to the expected PE ratio for the next 12 months has fluctuated between 20-60 times, while the current stock price corresponds to a PE ratio that has exceeded 60 times, reaching over 100 times.

UBS Group states that if investors want to continue to increase their shareholding in Tesla at the current price level, they must hold a belief that is out of the ordinary. For example, they must believe that by 2030 Tesla can achieve a delivery target of 15.5 million vehicles (currently the market expects 4.8 million), as well as an energy storage deployment target of 780GWh (currently the market expects 139GWh).

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