Morgan Stanley stopped recommending Tesla stock for the first time in two years. What is he waiting for?

The new Morgan Stanley analyst for Tesla Andrew Percoco withdrew the recommendation to buy shares of the electric car manufacturer, which the investment bank adhered to more than two years in a row, indicates CNBC. Concerns about the overvaluation of Elon Musk's company outweighed the optimistic forecast.

Percoco on December 7 downgraded Tesla shares from "above market" (Overweight, consistent with a buy recommendation) to "market perform" (Equal Weight, a recommendation to neither buy nor sell the security). He also raised the target price by $15 to $425 per share. This target is higher than the market average ($401 per share, according to FactSet), but still below the current stock price ($455 at the close of trading on Dec. 5).

Tesla shares fell 1.3% on the Nasdaq premarket after rising 0.1% in the previous trading session.

Percoco took over analytical oversight of Tesla stock at Morgan Stanley from Adam Jonas, who has long been bullish on Musk's company. He had held an Overweight rating on Tesla since September 2023, but recently switched to AI market reviews, CNBC notes. Following his predecessor, Percoco recognized Tesla's leadership in unmanned transportation and robotics. However, with Tesla's share price now close to fair value and the risk of a downward revision to consensus forecasts in the short term, he prefers to wait for a "better entry point," the Morgan Stanley analyst said.

At the same time, Percoco noted the attractive risk-return ratio of Tesla shares for long-term investors. In his optimistic scenario, quotes could rise by 89% to $860 per share as early as 2026, if the company copes with the downturn in the electric car market, as well as show progress in the deployment of robotaxis and scaling the release of humanoid robots Optimus. However, a pessimistic version of Morgan Stanley's forecast calls for a 70% drop in the value of the securities, to $145, amid increased competition, pressure on margins and possible regulatory challenges with the rollout of autonomous driving technology, Tesla minority shareholder Sawyer Merritt was quoted by Percoco as saying.

On Wall Street, there is no consensus on Tesla shares. 20 analysts give a "buy" recommendation (Buy and Overweight ratings) to the company's securities, 19 experts hold a neutral position (Hold), and 12 more advise to sell (Sell and Underweight). The average target price of $401 per share, calculated by FactSet, implies a decline in Tesla quotes by about 12% from current levels in the next 12 months.

Additional pressure on Tesla quotes may come from the Optimus robot incident, which questioned the autonomy of the device. The footage from the event in Miami, which took place on December 6, shows the robot falling backwards, while making a movement with its hands to the "head", simulating the removal of a VR-headset. According to the Electrek portal, this gesture indicates that the machine was remotely controlled by a human operator at the time of the fall.

This article was AI-translated and verified by a human editor