It's all in the price: Why Morgan Stanley's new Tesla analyst has downgraded the stock.

By Jules Rimmer

Andrew Percoco sees 'choppy environment' ahead for Tesla stock

Tesla shares have rallied by a third in the last three months, outperforming the market, but Morgan Stanley see no upside ahead.

Tesla may be a global leader in electric vehicles, manufacturing, real world AI and renewable energy and therefore warrant a premium valuation, but for Morgan Stanley there's a fair price for everything and this is now all fully discounted.

The bank's new analyst on the stock, Andrew Percoco, has downgraded his recommendation on Tesla (TSLA) from overweight to equal-weight, while upping the price target to $425 from $410 per share.

Tesla shares are currently trading at $454, roughly 7% above the revised Morgan Stanley target. In the last three months, Tesla has outperformed the wider market and rallied by roughly a third but in 2025 so far, has advanced just 12%.

Percoco, who took over coverage from Adam Jonas and uses a sum-of-the-parts (SOTP) model to analyze the company, finds valuation metrics no longer justify a buy rating, and predicts a "choppy trading environment" for Tesla shares through 2026.

In his report published Dec. 7, Percoco acknowledges that Tesla is much more than just an auto manufacturer, but he sees downside to estimates for this central part of its business. Morgan Stanley's estimates for electric vehicle sales in 2026 is 13% below the consensus among Wall Street analysts.

Despite these lower volume forecasts, Percoco remains optimistic about Tesla's 'Full Self-Driving' product launch, describing it as "a real game-changer" and "a significant competitive advantage" over rivals.

Tesla Total Vehicle Sales (units). 2025 has been a difficult year with public relations suffering from Elon Musk's controversial political profile.

While revamping his SOTP model for Tesla, Percoco has integrated forecasts for its humanoid division, Optimus. Tesla is a leader in this technology, owing to its scale, vertical integration, access to data, compute and energy and its position in real-world AI. Percoco attaches a value of $60 per share to Optimus, while also incorporating greater upside to its robotaxi business -Tesla Mobility.

While appreciating the worth of Tesla's non-auto operations, Percoco thinks the catalysts in these areas are broadly priced in so his recommendation is to wait for a better entry point into the stock.

Considering the valuations, Percoco reckons that Tesla's price to earnings before interest, tax, depreciation and amortization ratio is quite demanding on 30 times the consensus for 2030, and 48 times Morgan Stanley's assessment.

The analyst provides both a bullish and a bearish alternative scenario. In the more optimistic layout, Tesla manages the EV downturn and scales both Robotaxi and Optimus, and Percoco sees shares rising 89% to $860.

In the more pessimistic schema, Tesla succumbs to competition and margin pressure, the market disregards Optimus in valuations and Robotaxi has slower growth expected. In this setup, Percoco thinks $145 is possible, 70% below current levels.

Of the fifty or so analysts contributing recommendations to FactSet, only a quarter roughly rate Tesla sell or underweight, while buys and holds account for the remainder.

-Jules Rimmer

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12-08-25 0504ET