What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ:TSLA) fell 4.1% in the afternoon session after Morgan Stanley downgraded the stock to "Equal-Weight" from "Overweight," citing concerns that the company's valuation was too high.
The bank's new analyst covering the stock, Andrew Percoco, noted that while Tesla was a leader in electric vehicles, manufacturing, and AI, its stock price appeared to be trading near its fair value. Despite the downgrade, Morgan Stanley actually increased its price target on the shares to $425 from $410. However, this new target was below where the stock was trading. The analyst predicted a "choppy trading environment" for the shares through 2026 and expressed a more cautious outlook on the broader EV industry, forecasting Tesla's 2026 auto volume to be below consensus estimates.
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What Is The Market Telling Us
Tesla’s shares are extremely volatile and have had 44 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock gained 4.1% on the news that reports indicated the U.S. administration planned to prioritize robotics development, a move that could benefit the company's Optimus humanoid robot project.
According to reports, the Commerce Secretary met with robotics CEOs and expressed strong support for advancing the sector, with the administration considering an executive order to accelerate innovation. This news was bolstered by other positive developments for the electric vehicle maker. The company's Shanghai factory reported a significant rebound in shipments, delivering 86,700 vehicles in the previous month, a 41% jump from October. Additionally, Tesla qualified for the largest allocation of advanced energy project tax credits, receiving a certification worth $240.3 million from the IRS. The company also continued its push for its Full Self-Driving technology in Europe, hosting the mayor of Rome for a road demonstration.
Tesla is up 15% since the beginning of the year, but at $436.22 per share, it is still trading 9.1% below its 52-week high of $479.86 from December 2024. Investors who bought $1,000 worth of Tesla’s shares 5 years ago would now be looking at an investment worth $2,014.
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