Morgan Stanley has left its bullish camp on Tesla, saying valuation concerns outweigh its optimistic outlook for the electric car maker amid massive demands that could move markets on Wall Street. Analyst Andrew Percoco downgraded Tesla stock from overweight to equal weight. Percoco raised its price target by $15 to $425, which still reflects about 6% downside from Friday’s closing price. “Tesla is the clear world leader in electric vehicles, manufacturing, renewable energy, and real-world AI, and therefore deserves a premium valuation,” Percoco wrote to customers in a Sunday memo, using the acronym for artificial intelligence. “However, high expectations for the latter have pushed the stock closer to a fair valuation,” Percoco said, noting that Tesla stock trades at a whopping 30 times the company’s 2030 EBITDA estimates. “We’ll wait for a better entry,” he said, adding that the company expects to underperform compared to consensus expectations for the next 12 months. According to LSEG, the downgrade removes Percoco from Wall Street’s majority stock, with the majority of analysts maintaining strong ratings of either “buy” or “buy.” However, his price target is well above the average price of around $375. Tesla stock has risen more than 12% since the beginning of the year, underperforming the S&P 500 index and the tech-heavy Nasdaq Composite Index over the same period. Percoco, who recently took over coverage of Morgan Stanley stocks from longtime Tesla bull Adam Jonas, said he expects a “volatile trading environment” for Tesla next year. The stock has been rated Overweight since September 2023. Jonas has moved to a new role within Morgan Stanley’s research division focused on AI.
