Why did Morgan Stanley downgrade Tesla stock?

Morgan Stanley downgraded Tesla stock due to valuation concerns, despite acknowledging its leadership in EVs and AI.

What is Tesla's valuation according to Morgan Stanley?

Morgan Stanley noted Tesla shares trade at approximately 30 times the firm's 2030 EBITDA estimate, suggesting high expectations.

What is the outlook for Tesla shares from Morgan Stanley?

Morgan Stanley anticipates a choppy trading environment for Tesla shares over the next year and suggests waiting for a better entry point.

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Morgan Stanley Dumps Tesla Stock: Valuation Fears Mount

8 Dec, 2025

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Summary

Analyst downgraded Tesla stock to equal weight from overweight.
Tesla shares trade at 30 times the firm's 2030 EBITDA estimate.
Tesla shares have gained over 12% this year, underperforming indices.

Morgan Stanley Dumps Tesla Stock: Valuation Fears Mount

Morgan Stanley has exited its bullish position on Tesla, citing significant valuation concerns that overshadow the firm's optimistic outlook for the electric vehicle manufacturer. Analyst Andrew Percoco downgraded Tesla's stock from overweight to equal weight, a notable move on Wall Street that places him against the majority of analysts who maintain buy ratings.

Despite raising his price target to $425, Percoco indicated that Tesla's shares are approaching fair valuation due to high expectations, particularly concerning its AI advancements. The stock currently trades at approximately 30 times Morgan Stanley's 2030 EBITDA estimate, a metric the firm finds steep.

Percoco, who recently assumed coverage of Tesla, anticipates a challenging trading period for the stock over the next twelve months. This downgrade, which had been anticipated by some given the analyst's new focus on AI, contrasts with Tesla's year-to-date performance of over 12% gains, though it has underperformed major indices.