A significant shift in sentiment has emerged from one of Tesla’s long-standing Wall Street supporters. Morgan Stanley, previously counted among the electric vehicle maker’s most optimistic analysts, has revised its position on the stock. On Monday, the investment bank removed its “Overweight” rating, citing a valuation that now leaves little margin for error. While recent sales data from China offers a positive operational note, skepticism is growing regarding the sustainability of the stock’s recent rally.
A Neutral Rating Amid a Raised Target
The downgrade to an “Equal-weight” rating, indicating a neutral stance, marks a pivotal change. Paradoxically, Morgan Stanley’s analysts simultaneously increased their price target from $410 to $425 per share. However, given the stock’s recent trading at significantly higher levels, this new target now implies the shares are overvalued. Lead analyst Andrew Percoco attributed the rating change to the substantial share price appreciation over recent months. The market, he suggested, has now largely priced in the high expectations surrounding Tesla’s artificial intelligence initiatives and robotics ventures.
Specifically, the analysts assign a value of $60 per share to the “Optimus” humanoid robot and $145 per share to the Full Self-Driving (FSD) software. With these premiums already factored into the valuation, the bank warns of a potentially “choppy” trading environment through 2026. Morgan Stanley also reduced its vehicle delivery forecast for the year 2025.
Chinese Market Data Presents a Mixed Picture
Contrasting with the Wall Street focus on valuation, the crucial Chinese market delivered ambiguous signals. According to the China Passenger Car Association (CPCA), Tesla’s retail sales in the region surpassed 73,000 vehicles in November. This figure represents a massive month-over-month recovery of more than 181% from a weak October. Yet, a year-over-year comparison reveals stagnating growth, with sales dipping slightly by 0.47% compared to November of the previous year.
On a positive note, the company celebrated a manufacturing milestone. Its Shanghai Gigafactory, Tesla’s primary export hub, produced its four-millionth vehicle on December 8.
Sector-Wide Reassessment Applies Pressure
The scrutiny on the sector leader is part of a broader reassessment of the U.S. electric vehicle industry. On the same day, Morgan Stanley also downgraded competitors Rivian and Lucid. The firm pointed to a challenging market environment, a slowing rate of EV adoption, and the phasing out of key tax credits as reasons for the sector-wide caution.
Tesla’s shares are currently trading at €384.60, showing relative stability. However, the gap to the 52-week high of approximately €457 underscores the recent corrective phase. The key question for the stock’s trajectory is whether the company can maintain the sales momentum from November through the final month of the year to justify its elevated market expectations.