Morgan Stanley Downgrades Tesla (TSLA) to Underweight, Raises PT

(Updated - January 16, 2020 5:48 AM EST)

(updating comment)

Morgan Stanley analyst Adam Jonas downgraded Tesla (NASDAQ: TSLA) from Equalweight to Underweight with a price target of $360.00 (from $250.00).

The analyst comments "We downgrade Tesla shares to Underweight from Equal-weight based on (1) valuation, (2) unfavorable risk-reward, and (3) risks to the long-term Chinese business that may not be fully appreciated by the market."

Jonas said four factors have driven TSLA's share price up ~105% over the last four months (vs. ~10% for S&P500): (1) stronger than expected global demand for Tesla vehicles, which has created more optimism around the long-term margin profile of the business; (2) China announcements that show Tesla's expansion into the world's largest electric vehicle (EV) market is progressing well from a demand and margin perspective; (3) supportive incentive developments (i.e. the potential, however small, for extended subsidies in the US); and (4) positive sentiment around product expansion.

"We believe these factors, combined with other market/technical forces have triggered a significant reduction in the market's implied risk premium for this asset," Jonas commented. "Near-term momentum and sentiment around the stock is admittedly very strong, but we ultimately question the sustainability of the momentum."

For an analyst ratings summary and ratings history on Tesla click here. For more ratings news on Tesla click here.

Shares of Tesla closed at $518.50 yesterday.

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