As the USA is about to enter the "Trump 2.0" era, "big donor" Musk and his company Tesla, which played a key role in his campaign, have recently benefited a lot. Since Trump's victory earlier this month, $Tesla (TSLA.US)$ stock prices have surged about 40%, hitting a two-year high.

However, UBS group analysts do not seem to believe that Tesla's recent upward trend can be sustained. The bank stated on Monday that Tesla's stock price may experience a double-digit correction, as the fundamentals of this auto company do not support its stock price surge since the election.

In the latest report, the bank maintained a 'sell' rating on Tesla stocks and set a target price of $226 per share. Although this price is slightly higher than the previous target price of $197 set by the bank, it still indicates about a 33% decline potential for Tesla compared to the current stock price.

'Trump 2.0' may not necessarily be beneficial.

Since Trump's victory, investors have been optimistic that Musk's relationship with the elected president will benefit Tesla. For example, Musk supports ending the electric vehicle tax credit, and some analysts believe this will primarily impact Tesla's competitors more.

Additionally, investors believe that relaxing regulations on the ai field and the possible disappearance of the investigation into Tesla's fully autonomous driving software are all favorable developments for the company.

However, UBS group stated that investors' thoughts may be misguided. For instance, eliminating the electric vehicle tax credit may not be entirely beneficial for Tesla, as it may prompt the company to resume price reductions on some models.

Fundamentals do not support it.

At the same time, ubs group warned that the aforementioned optimism is not supported by the fundamentals of Tesla's business, and the company's growth trajectory seems to be slower than what the current stock price suggests.

"Therefore, the rise in Tesla's stock price is mainly driven by animal spirits/momentum (this has occurred several times in Tesla's history). We urge investors to consider what needs to be believed to hold an increased shareholding in Tesla stocks at current levels," the report stated.

ubs group analysts further explained that Tesla's valuation received a significant boost after the election, returning to a valuation level of 1 trillion dollars. This implies that the company will grow rapidly, delivering 15.5 million autos annually by 2030, which, according to ubs group estimates, is more than three times Wall Street's expectation of delivering 4.8 million autos that year.

At the same time, by 2030, Tesla's energy business will need to store 780 gigawatt-hours of energy, which is more than five times Wall Street's estimate of 134 gigawatt-hours for that year. In addition, Tesla's self-driving taxi business will also need to increase by approximately 300 billion dollars in value.

Overvalued.

ubs group also pointed out in this report that Tesla's stock price has sent warning signals indicating that its valuation may be nearing a recent high point. Currently, Tesla's auto business accounts for only 12% of its total valuation.

According to the bank's research, historically, when Tesla's auto business is below 17% of its total market value, its stock price tends to "enter a downward channel."

The report stated, "The ratio was only around 10% in the previous two instances, and the adjustments we observed were 30% and 70%, respectively."

Editor/rice