- Morgan Stanley downgraded Tesla (TSLA) stock to Equal-weight from Overweight.
- The firm’s price target for Tesla increased slightly to $425 from $410.
- Analyst Andrew Percoco cited high expectations for Tesla’s AI ambitions as a factor behind the current fair valuation.
- Tesla’s projected vehicle volumes for 2026 and cumulative deliveries through 2040 were reduced due to slower EV adoption and increased competition.
- Other analysts remain bullish, highlighting Tesla’s AI and autonomous technology potential with higher price targets.
A new analyst at Morgan Stanley, Andrew Percoco, downgraded Tesla (TSLA) stock from Overweight to Equal-weight, revising the firm’s prior favorable stance. Despite this, he increased Morgan Stanley’s price target for Tesla shares modestly to $425 from $410. Percoco explained that Tesla’s strong AI growth expectations had created a premium valuation now considered fairly priced.
Percoco noted the company is viewed as more than just an automaker, but he anticipates a volatile trading period for Tesla shares over the next year. This view takes into account a downward revision to earnings estimates and the belief that Tesla’s growth engines beyond auto sales are already factored into the stock price. He stated, “While it is well understood that Tesla is more than an auto manufacturer, we expect a choppy trading environment for the TSLA shares over the next 12 months, as we see downside to estimates, while the catalysts for its non-auto businesses appear priced at current levels, driving our EW rating.”
Morgan Stanley also reduced its expectations for Tesla’s vehicle production, forecasting a 10.5% decrease in volumes for 2026 and an 18.5% cut in cumulative deliveries through 2040. These changes reflect a more cautious outlook on the pace of electric vehicle adoption in the U.S. and heightened global market competition. Percoco observed these factors in his updated forecast.
Following a challenging November, Tesla shares rebounded in recent trading. In early Monday sessions, TSLA stock declined roughly 3% but remains up over 41% in the past six months. Investors like Cathie Wood and Michael Burry have criticized the stock for being overvalued.
Meanwhile, other analysts remain optimistic. Wedbush analyst Dan Ives expressed confidence in Tesla’s future AI advancements, calling it a critical phase for the company. At a recent event, Ives described the approval of CEO Elon Musk’s compensation plan as a “bright green light” supporting Tesla’s autonomous technology goals. Wedbush maintains an Outperform rating with a price target of $600 for Tesla shares.
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