A new analyst at Morgan Stanley has sent Tesla (TSLA) stock downward following his latest downgrade of the company’s shares. Andrew Percoco downgraded Tesla to Equal-weight from Overweight, reversing the firm’s previously bullish position on the stock. Despite the downgrade in rating, Percoco upped the firm’s Tesla price target to $425 from $410, sending a mixed message.
According to Percoco, the “high expectations” of Tesla’s AI ambitions led to a premium valuation, one that is fairly priced at the moment. “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,” he wrote in a note to investors.
Tesla (TSLA) Still Expected to Rise?
As mentioned, Morgan Stanley does still project gains ahead for Tesla (TSLA) stock, with its forecast receiving a slight boost. “This is a reflection of lower [auto] volume expectations, with a 10.5% reduction in 2026 volumes and 18.5% reduction in cumulative deliveries through 2040 due to our more cautious view on the pace of EV adoption in the US, coupled with growing competition in global markets,” Percoco added.
Tesla shares have been on the mend this past week after a bearish November. Several investing experts, such as Cathie Wood and Michael Burry, have even called out the company and its stock for being overrated. In early trading on Monday, TSLA shares fell around 3%, but remain up over 41% in the last six months.
Also Read: US to Allow Nvidia (NVDA) H200 Chip Exports to China: Semafor
Furthermore, analysts like Wedbush’s Dan Ives remain bullish on Tesla shares, and he believes the automaker’s AI future is where investors should be looking. “In my opinion, it’s going to be the most important chapter ever in Tesla’s story,” Ives said from the Yahoo Finance Invest event in New York last week. Ives has called the passage of Musk’s pay package a “bright green light” for Tesla’s AI and autonomous tech plans, and has an Outperform rating on the stock and a Street-high $600 price target.