UBS Flags Tesla as Overvalued Despite Expected Q2 Beat
Summary
UBS analysts maintain that Tesla (NASDAQ:TSLA) is "fundamentally overvalued" ahead of its Q2 2025 earnings, despite expecting a broader auto sector beat driven by production and FX tailwinds. While UBS forecasts Tesla's Q2 EPS at $0.43 and auto gross margins at 14%, it highlights unresolved issues like policy uncertainty and EV credit phase-outs as significant risks. The firm also notes that CEO Elon Musk's commentary will heavily influence the stock's price reaction, emphasizing that underlying structural concerns persist despite recent sector valuation reratings.
UBS Flags Tesla as Overvalued Despite Expected Q2 Beat\n\nPublication Date: July 15, 2025\n\nUBS analysts reiterated their stance on Monday, asserting that Tesla (NASDAQ:TSLA) remains "fundamentally overvalued" as it approaches its Q2 2025 earnings release. This assessment comes even as broader industry trends, including a sector-wide production beat and favorable foreign exchange tailwinds, are anticipated to provide a temporary uplift to automotive stocks.\n\nIn a comprehensive note covering U.S. autos, auto-tech, and parts sectors, UBS projects that the second-quarter earnings season will largely exceed market expectations. The firm stated, "We expect 2Q25 results to largely beat expectations on better production and FX."
Tesla's Earnings Preview: Sentiment vs. Fundamentals\n\nDespite this near-term industry optimism, UBS expresses skepticism regarding Tesla's underlying valuation. The firm forecasts Tesla's Q2 earnings per share (EPS) at $0.43, aligning with the consensus estimate. Furthermore, UBS anticipates auto gross margins (excluding regulatory credits) to reach 14%, slightly surpassing the Street's 13.5% projection.\n\nHowever, UBS warns that persistent core issues, such as policy uncertainty and the ongoing phase-out of electric vehicle (EV) credits, remain unresolved. The firm highlighted, "We see real risk to regulatory credit revenue for both TSLA and RIVN as well as demand with removal of EV credits."
\nThe analyst note also underscored the significant influence of CEO Elon Musk's public commentary on the stock's performance, stating, "TSLA remains fundamentally overvalued, but the price reaction will depend on Musk's call comments." \n## Sector Rerating and Earnings Volatility\n\nUBS cautions that the U.S. automotive sector has experienced an average valuation rerating of approximately 20% since March. This rerating has occurred despite the presence of long-term structural headwinds. While short-term sentiment may continue to fuel volatility, the underlying fundamental concerns for the sector, and particularly for Tesla, are expected to persist.\n\nInvestors seeking to stay informed on quarterly earnings can utilize tools like the Earnings Calendar API, which provides report dates, EPS consensus, and revenue estimates for major stocks. For real-time updates on analyst rating changes and target price adjustments across various sectors, resources such as the Up/Down Grades by Company API can be valuable.