UBS analysts aren't sold on Tesla's (TSLA) - Get Report autopilot feature, leading the firm to lower its price target on the stock to $160 from $200 while also cutting its earnings forecast for the electric vehicle maker.
The firm currently has a sell rating on Tesla shares, which were even at $222.88 on Friday.
"Deliveries may provide a pop, but earnings may cause a drop. We expect losses in the second half to increase as deliveries likely soften and the impact of pricing actions continues to weigh on margins," said analyst Colin Langan.
Langan widened his second-quarter loss per share estimate to 78 cents from a previous view of 49 cents. The analyst also forecast lower earnings per share through 2019 until 2023.
One of the firm's biggest concerns is the $2,400 average estimated Autopilot feature price cut, which Langan believes will severely squeeze margins as profits per car decline and 70% of buyers choose the autopilot option.
Separately, Tesla announced that a single battery module caused a parked Tesla to catch fire in Shanghai on April 21. The company said it found no system defects and that it has revised its vehicle settings to further protect its batteries following its investigation into the incident.