Tesla stock weakened on Monday after Morgan Stanley’s new lead analyst issued a downgrade, marking a notable shift in the bank’s long-held bullish stance on the electric-vehicle maker.
Andrew Percoco, who assumed coverage following the transition of longtime Tesla analyst Adam Jonas, cut Tesla’s rating to Equal-weight from Overweight. The move came even as Percoco increased the firm’s price target to $425, up from $410, reflecting a recalibrated view of Tesla’s long-term growth drivers.
According to Percoco, Tesla’s valuation has surged on investor enthusiasm surrounding its artificial intelligence ecosystem—especially self-driving technology and robotics. That optimism, he said, has pushed the stock into a zone where much of the upside is already reflected.
“High expectations for Tesla’s AI roadmap have created a premium valuation,” Percoco wrote. “While Tesla is far more than a traditional automaker, we expect choppy trading over the next year as estimates come under pressure and non-auto catalysts appear fully priced in.”
Tesla shares fell roughly 3% in early Monday trading following the downgrade.
Raising the Price Target, But Cutting the Rating
Despite the cautious rating, Percoco’s sum-of-the-parts analysis added $60 per share in equity value for Tesla’s humanoid robotics segment, which he describes as one of the company’s most compelling future businesses. However, he tempered expectations for Tesla’s auto and energy divisions.
The analyst now expects slower EV adoption in the United States and intensifying global competition. His forecast calls for:
- 10.5% lower 2026 vehicle volume
- 18.5% fewer cumulative deliveries through 2040
Those softer projections contrast with Jonas’s prior view, which positioned Tesla as Morgan Stanley’s top auto pick—largely due to the company’s advancements in “embodied AI,” including Full Self-Driving (FSD), robotaxis, and Optimus robots.
AI Remains Tesla’s “Crown Jewel”
Percoco emphasized that he still sees transformative potential in Tesla’s autonomous driving platform.
“Full Self Driving remains the crown jewel of Tesla’s auto business,” he said, calling its capability a “game changer” that offers a major competitive advantage over both EV and legacy automakers.
Tesla is positioned to expand its robotaxi program significantly, with Percoco projecting:
- 11 U.S. service launches in 2025
- 33 launches in 2026, including expansions in Austin, the Bay Area, Nevada, and Arizona
However, regulatory scrutiny could slow deployment, particularly due to Tesla’s camera-only perception system—an approach that critics say is less robust than competitors like Waymo, which use both cameras and sensors.
Long-Term Case Still Attractive
Percoco maintains a wide valuation range for Tesla, with a bull case of $860 and a bear case of $145. He argues that long-term investors could still see strong returns if Tesla successfully:
- Navigates the current EV market slowdown
- Scales its robotaxi network
- Expands FSD adoption globally
- Mass-produces Optimus humanoid robots
Despite the downgrade, he notes that Tesla still offers an “attractive risk-reward profile” for those betting on its broader AI-driven future.
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