Morgan Stanley cut Tesla to hold for the first time since June 2023, warning the stock fully prices in AI and robotics ambitions.
Why it matters: The downgrade from Wall Street’s most influential Tesla analyst signals growing unease with the stock trading at 210x forward earnings.
The Details
- Morgan Stanley analyst Andrew Percoco issued his first note as new head of Tesla coverage Sunday, lowering the rating to equal-weight, reports Bloomberg.
- Percoco replaces Adam Jonas, who maintained an overweight rating since September 2023.
- Tesla stock fell as much as 3% Monday to trade around $441.
- Percoco expects Tesla’s North American EV sales to decline 12% in 2026 amid an industry-wide slump.
- The analyst values Tesla’s Optimus humanoid robot initiative at $60 per share.
By The Numbers
- New Price Target: $425 (6.6% downside from Friday’s close)
- Average Analyst Target: $388
- Forward P/E Ratio: 210x projected earnings
- S&P 500 Valuation Rank: 2nd most expensive (behind Warner Bros. Discovery at 220x)
- Analyst Ratings: 28 buy, 19 hold, 16 sell
- 2025 Stock Performance: Up approximately 10% (vs. S&P 500 up 16%)
EVXL’s Take
Morgan Stanley’s downgrade lands just days after legendary investor Michael Burry called Tesla “ridiculously overvalued” in a scathing analysis. Burry identified the pattern perfectly: Tesla bulls pivoted from EVs to autonomy to robots each time competition arrived, keeping valuations elevated while the core car business struggled.
Percoco’s 12% North American sales decline forecast for 2026 reinforces what EVXL has documented throughout 2025: Tesla’s automotive fundamentals face unprecedented pressure. The stock trades at nearly ten times the S&P 500’s multiple, yet the underlying business is losing ground in China, Europe, and now its home market. When Morgan Stanley’s new lead analyst opens with a downgrade, it signals even the bulls are running out of narrative pivots.
Frequently Asked Questions
- Why did Morgan Stanley downgrade Tesla? Analyst Andrew Percoco believes Tesla’s stock already reflects full value for its AI, robotaxi, and robotics businesses, with limited upside catalysts at current levels.
- What is Tesla’s current price-to-earnings ratio? Tesla trades at approximately 210 times projected 12-month earnings, making it the second most expensive stock in the S&P 500.
- Is this Morgan Stanley’s first Tesla downgrade? Yes, it marks the firm’s first rating cut since June 2023.
