Tesla stock drops as new Morgan Stanley analyst downgrades shares, citing valuation

Morgan Stanley’s newest Tesla (TSLA) expert downgraded the bank’s standing connected the stock, a reversal from a anterior bullish position.

Andrew Percoco downgraded Tesla to Equal-weight from Overweight upon resuming sum of Tesla aft anterior expert Adam Jonas shifted to a antithetic relation astatine Morgan Stanley. Interestingly, Percoco upped the firm’s Tesla terms people to $425 from $410 successful the process.

Percoco wrote that “high expectations” of Tesla’s AI ambitions led to a premium valuation, 1 that is reasonably priced astatine the moment.

“While it is good understood that Tesla is much than an car manufacturer, we expect a choppy trading situation for the TSLA shares implicit the adjacent 12 months, arsenic we spot downside to estimates, portion the catalysts for its non-auto businesses look priced astatine existent levels, driving our EW rating,” helium said.

Tesla banal shed 3% successful aboriginal commercialized connected Monday.

Percoco upped his Tesla terms target, however, pursuing a sum-of-the-parts investigation wherever the steadfast added $60 a stock successful other equity worth coming from the humanoid robotics business, portion “moderating” its outlook connected the car and vigor business.

“This is simply a reflection of little [auto] measurement expectations, with a 10.5% simplification successful 2026 volumes and 18.5% simplification successful cumulative deliveries done 2040 owed to our much cautious presumption connected the gait of EV adoption successful the US coupled with increasing contention successful planetary markets,” helium wrote.

The determination to downgrade Tesla comes arsenic an about-face for Morgan Stanley, wherever Adam Jonas led a bullish complaint for the EV maker, making it his apical prime successful the car space. Interestingly, it wasn’t the car concern unsocial that drove Jonas’s rosy outlook connected Tesla; it was Tesla’s “embodied AI” play with afloat self-driving (FSD), robotaxis, and Optimus robots.

Which is not to accidental Percoco isn’t besides bullish connected Tesla’s embodied AI efforts.

“Full Self Driving (FSD) is the crown jewel of Tesla's car business. We judge that its leading-edge idiosyncratic autonomous driving offering is simply a existent crippled changer, and remains a important competitory vantage implicit its EV and non-EV peers,” helium added.

With regards to robotaxis, Percoco predicted astir 33 full caller work launches crossed the US successful 2026, up from the approximate 11 launches expected successful 2025. In summation to services successful Austin and the San Francisco Bay Area, Tesla is expected to trial its Robotaxi work successful Nevada and Arizona shortly.

Tempering that maturation could beryllium regulatory hurdles stemming from Tesla’s vision-only system, successful summation to “scaling challenges” arising from adverse upwind conditions similar snowfall that could artifact cameras. Competitors similar Waymo usage systems that harvester some cameras and sensors to comprehend roadworthy conditions.