Tesla's RoboTaxi has been delayed by two months, and soon after it was criticized by Wall Street's UBS Group.

On Friday, July 12, UBS analysts Joseph Spak and others issued a report downgrading Tesla's rating from "neutral" to "sell".

UBS pointed out in the report that Tesla's stock price has risen too much and too fast, making its current valuation increasingly difficult to justify.

The current trading price of the stock is 86 times the one-year forward earnings, lacks visibility, and has a risk of delay or failure to achieve growth targets.

According to UBS, under the push of artificial intelligence enthusiasm, the high valuation of Tesla's non-core business has reached a level that may cause concern. Based on past experience, when the proportion of automobile business in Tesla's stock price drops below 30%, its stock price will enter a downward channel.

UBS also pointed out that Tesla's original RobotTaxi launch time has been delayed, indicating that the project implementation may be more challenging than expected. Under the pessimistic assumption, the robot taxi business will not bring any value to Tesla.

Beware of the cooling of AI enthusiasm.

As one of the 10 most expensive stocks in the S&P 500 index, Tesla has risen 46% in the past three months before plummeting 8.4% on Thursday. Investors bet that Musk can turn the company into an artificial intelligence giant.

However, UBS pointed out that the premium given by investors to Tesla's new business, non-core business, and growth plan has expanded due to the enthusiasm of artificial intelligence. Once this enthusiasm declines, it may affect the stock valuation.

At the current level, we still believe that there is more than $500 billion of growth potential in the future of Tesla's market cap. Even if we give it 5 years to achieve this growth, it means that its market value will only be $1 trillion after 5 years.

And this is just to prove the rationality of the current level; to prove the rationality of the buy rating, we need to see greater opportunities.

Although Tesla has invested heavily in the field of artificial intelligence and its technology is advancing, the investment cost is high, the speed of technology iteration may slow down, and the return period is long. If the market's enthusiasm for artificial intelligence weakens, it may affect Tesla's P/E ratio.

UBS's valuation attribution analysis shows that the market has always valued Tesla's core automotive business between $60-90 per share. The average value of non-automotive business in the past two years is about $140 per share, and it has now risen to nearly $175 per share with recent gains.

The institution believes that the high valuation of Tesla's non-core business has reached a level that may cause concern. And according to historical experience, when the proportion of automobile business in Tesla's stock price drops below 30%, its stock price will enter a downward channel.

At the same time, UBS raised Tesla's target price from $147 to $197, which is 18% lower than the current stock price; at the same time, the P/E ratio was raised from 45 times to 55 times.

According to UBS estimates, Tesla's automotive business value is about $57 per share (about 28.9% of the current target price), and the value of energy businesses with strong recent growth and higher profit margins is about $18 per share. The value of the fully automated driving/robot taxi business is expected to be about $18 per share.

However, the total value of these businesses is only $93 per share, which means that about 61% of the current stock price is a premium or an estimation of future opportunities by investors.

Automotive business faces more intense competition, energy business grows rapidly.

Looking forward to the next five years, UBS is conservative about Tesla's car delivery volume in 2030, expecting it to reach about 3.9 million vehicles, which is 19% lower than the market's general expectation.

The institution believes that demand for Tesla in the US market may already be saturated, while facing more intense competition in Europe and China. Therefore, Tesla needs to launch new models or update existing models to stimulate demand, but even so, achieving the market's expected delivery target of over 5 million vehicles will still be a challenge.

Regarding Tesla's energy business, UBS believes that its recent growth has been significant and that this business currently brings the company higher profit margins.

Although there is a possibility of unstable energy storage deployment, considering the vast opportunities in the fixed storage market, it is possible for Tesla's energy business to achieve a compound annual growth rate of about 30% by 2030.

However, this requires more investment in production capacity, and as the scale of the business expands, the growth rate may be affected by the law of large numbers.

What does the delay in the RoboTaxi mean?

Regarding the robot taxi business, UBS pointed out that Tesla's original Robotaxi launch time has been delayed, indicating that project implementation may be more challenging than expected.

UBS believes that it is still too early to achieve meaningful robot taxi operations in the US and may not be possible within this decade.

Although Tesla's end-to-end (Gen AI) approach has brought significant improvements to FSD products, continuous technological progress and a large amount of data collection are still needed to achieve the solution for robot taxis. UBS believes that as technology improves, the rate of improvement may slow down and costs may increase.

They have adjusted the valuation of the robot taxi business:

The business is valued at approximately $30 billion (9 USD per share) under basic assumptions, about $100 billion under optimistic assumptions. However, under pessimistic assumptions, the robot taxi business will not bring any value to Tesla.