TLDR
- Morgan Stanley downgraded Tesla from Overweight to Equal Weight with a $425 price target, implying 6.5% downside
- Andrew Percoco takes over as lead Tesla analyst from Adam Jonas at the firm
- Auto business valuation slashed to $55 per share on lower delivery expectations through 2040
- Full Self Driving and network services valued at $145 per share with improved long-term assumptions
- Optimus humanoid robot program carries $60 per share value but includes 50% probability discount
Morgan Stanley’s new Tesla analyst isn’t wasting time making waves. Andrew Percoco downgraded the stock to Equal Weight in his first major call.
The $425 price target sits about 6.5% below current trading levels. Percoco takes over from Adam Jonas, who moves to focus on AI research.
The downgrade boils down to one thing: valuation. Morgan Stanley thinks Tesla’s AI potential is already baked into the stock price.
“We wait for a better entry,” Percoco told clients. His team expects bumpy trading for the next year.
Auto Business Gets Reality Check
The vehicle segment took the biggest hit. Morgan Stanley cut its valuation to just $55 per share.
Delivery forecasts dropped across the board through 2040. The firm now models 1.6 million vehicles for 2026.
Slower EV adoption and tougher competition drive the lower numbers. Tesla should still gain market share as the industry shrinks.
But that growth won’t justify today’s stock price. Morgan Stanley sees risk to Wall Street’s estimates.
Software Shines Brighter
Full Self Driving remains the star. Morgan Stanley calls it “the crown jewel” of Tesla’s car business.
Network services earn a $145 per share valuation. That’s actually higher than before.
More customers should buy FSD according to the updated model. Revenue per user climbs across all software services.
Robotaxi assumptions increased for the near term. But regulatory hurdles and scaling challenges remain real problems.
The Optimus robot program gets a $60 per share value. Morgan Stanley applies a 50% discount for execution risk though.
Tesla’s AI capabilities and manufacturing scale support the robotics play. But turning potential into profit stays uncertain.
Morgan Stanley raised its price target from $410 to $425 despite downgrading the stock. Updates across vehicles, robotaxis, services and robots influenced the new number.
The bull case reaches $860 per share with 89% upside. The bear case falls to $145 with 70% downside.
Tesla leads in EVs, energy and AI applications. The company positions itself to dominate multiple future markets.
But leadership and cheap valuations don’t always go together. Morgan Stanley sees the good news already priced in.
The firm expects choppy trading as reality meets expectations. Downside risk to estimates creates near-term pressure.
Tesla trades close to fair value according to Morgan Stanley’s analysis. That makes waiting for a pullback the smarter move.
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