A Morgan Stanley analyst has downgraded the stock of Tesla Inc. (NASDAQ:TSLA) despite the company’s impressive performance in the electric vehicle sector.
Morgan Stanley Cuts Tesla
Andrew Percoco, a new analyst at Morgan Stanley, has revised his recommendation for Tesla from “overweight” to “equal-weight.” He has also raised the price target to $425 from $410 per share, reported MarketWatch.
Despite Tesla’s global strength in EVs, manufacturing, real-world AI, and clean energy, Percoco argues that the stock remains overpriced. He predicts a “choppy trading environment” for Tesla shares through the next year.
Percoco’s report acknowledges Tesla’s diverse business but suggests that the valuation metrics no longer justify a buy rating. He foresees a challenging period for Tesla’s shares until 2026, particularly in the electric vehicle sales sector.
Despite this, Percoco remains optimistic about Tesla’s ‘Full Self-Driving‘ product launch, which he believes will give the company a significant competitive advantage over its rivals.
Growing Skepticism Around Tesla’s Value
This downgrade comes amid a series of warnings about Tesla’s valuation. Earlier this month, Big Short investor Michael Burry criticized Tesla’s market capitalization as “ridiculously overvalued,” stating that it had been overvalued for a long time.
Wedbush says Tesla’s future valuation now hinges more on its autonomous and AI strategy than on vehicle sales, raising its price target to $600 on expectations for robotaxi and Dojo-driven growth.
The firm sees a potential profitability surge in 2025 if Full Self-Driving adoption ramps up. However, the latest quarter delivered mixed results, with revenue beating forecasts but margins and earnings still under strain.
Moreover, NYU Stern finance professor Aswath Damodaran recently expressed skepticism about the valuations of top tech giants, specifically naming Tesla as one of the most irrationally valued companies in the current market.
Benzinga Edge Stock Rankings shows that TSLA had a strong price trend over the short, medium and long term. Its momentum ranking was strong at the 84th percentile, whereas its value ranking was poor at the 3.67th percentile; the details of other metrics are available here.
Price Target: On a year-to-date basis, Tesla stock climbed 19.96% as per data from Benzinga Pro. On Fridayy, it fell 0.10% to close at $455.
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