TLDR
- Morgan Stanley downgraded Tesla stock from “Overweight” to “Equal-weight” on December 8.
- Despite the downgrade, Morgan Stanley raised Tesla’s price target from $410 to $425.
- The revised valuation includes updates to Tesla’s non-vehicle business areas such as AI and robotaxi initiatives.
- Weak demand forecasts for electric vehicles and the energy segment contribute to the downgrade.
- CEO Elon Musk’s compensation structure may cause potential dilution and pose a risk to Tesla stock.
Tesla stock (NASDAQ: TSLA) is facing renewed pressure after a downgrade by Morgan Stanley’s Adam Jonas on December 8. Jonas changed his stance on the stock, lowering it from “Overweight” to “Equal-weight.” Despite this, he increased his price target from $410 to $425, reflecting new valuation models and growth in emerging business lines.
The downgrade comes as Tesla stock trades at $455, with pre-market trading showing a decline of 1.74%, pushing the price to $447.86. Jonas’ reassessment of the company’s valuation includes updated analysis on Tesla’s non-vehicle business sectors, including its AI and robotaxi initiatives.
Jonas Adjusts Tesla Stock Valuation Amid Revised Forecasts
Jonas’ revised outlook follows a comprehensive reassessment of Tesla’s sum-of-the-parts valuation. His latest model includes a formal valuation for Tesla’s Optimus humanoid project. The model also factors in Tesla’s robotaxi plans, which are analyzed through a city-level autonomous deployment framework.
Tesla’s software-driven Network Services have also been adjusted in the updated analysis. This includes considering the potential for recurring revenue from Full Self-Driving subscriptions. The company’s long-term attach rates are also factored into Jonas’ new valuation.
However, Tesla’s non-vehicle businesses, like AI and robotics, face some challenges. Tesla stock remains under pressure due to weaker outlooks for electric vehicle demand and the energy segment. Potential dilution linked to CEO Elon Musk’s compensation structure also presents a downside risk for Tesla stock.
Tesla’s Future Prospects and Wall Street’s Caution
Despite the adjustments to Tesla’s valuation, Morgan Stanley maintains that the company remains a global leader. Tesla’s leadership in electric vehicles, renewable energy, and AI continues to justify a premium valuation.
“Tesla remains a clear global leader in electric vehicles, manufacturing, renewable energy, and real-world AI,” Jonas stated.
However, Tesla stock’s high valuation is starting to reflect long-term expectations. The company is trading at levels that now account for major future catalysts in autonomy and humanoid robotics. Wall Street is cautious, preferring to wait for a better entry point as the stock’s consensus expectations likely adjust lower in the near term.
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