A significant shift in sentiment has emerged from one of Tesla’s most prominent Wall Street supporters. After more than two years of bullish advocacy, analysts at Morgan Stanley have downgraded the electric vehicle maker’s stock, signaling that its current price leaves little room for error. The move underscores a growing tension between Tesla’s undeniable technological leadership and its stretched market valuation.
A Changed Rating Reflects New Caution
Lead analyst Andrew Percoco has revised the firm’s recommendation on Tesla shares from “Overweight” to “Equal Weight.” While he concurrently raised the price target to $425, this adjustment implies minimal upside from recent trading levels. The core rationale is straightforward: the market has already priced in lofty expectations for the company’s artificial intelligence and renewable energy ventures, leaving shares vulnerable to any disappointment.
Percoco’s detailed assessment highlights substantial concerns regarding key valuation metrics. The stock currently trades at approximately 30 times the estimated EBITDA for 2030, a premium that offers investors scant margin for safety. A more skeptical view of the core automotive business drove a portion of the revised outlook. Morgan Stanley now values this segment at just $55 per share, citing an anticipated slowdown in electric vehicle adoption and intensifying competition. The bank forecasts vehicle deliveries will reach 1.6 million units in 2026.
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Software and Robotics Remain the Core Thesis
Despite the downgrade, Morgan Stanley has not abandoned its positive long-term view of Tesla’s strategic direction. The analysts have simply reframed the investment narrative, shifting emphasis away from traditional car manufacturing.
The company’s Full Self-Driving (FSD) software suite is labeled the “crown jewel” of the auto division. In the bank’s valuation model, recurring software revenue and network services now contribute $145 per share. Furthermore, the “Optimus” humanoid robotics initiative is assigned a value of $60 per share, though a 50% discount is applied due to uncertainties surrounding its development timeline and technical execution.
This analyst change and revised assessment highlight Tesla’s ongoing evolution in the eyes of Wall Street—from a pure-play automaker to a diversified AI and robotics platform. The long-term outlook remains wide-ranging, with a bull-case scenario of $860 per share and a bear-case of $145. However, for the coming twelve months, Morgan Stanley anticipates a volatile and challenging trading environment for the stock.
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