FILE – A Tesla logo is seen at the company’s store in Denver’s Cherry Creek Mall on Feb. 9, 2019. Owning Tesla stock in 2022 has been anything but a smooth ride for investors. Shares in the electric vehicle maker are down nearly 70% since the start of the year, on pace to finish in the bottom five biggest decliners among S&P 500 stocks. (AP Photo/David Zalubowski, File)
(Bloomberg/Matthew Griffin) — Elon Musk is eager to transform Tesla Inc. into a robotics and artificial intelligence company, but the electric-vehicle maker’s stock price already reflects those businesses and is at a “full valuation,” according to Morgan Stanley, which lowered its rating on the company to the equivalent of a hold, its first cut since June 2023.
Tesla shares trade at about 210 times projected earnings over the next 12 months, making it the second most expensive company in S&P 500 Index, trailing just Warner Brothers Discovery Inc. at 220 times and well ahead of third place Palantir Technologies Inc.’s multiple of 186.
“While it is well understood that Tesla is more than an auto manufacturer, we expect a choppy trading environment” over the next year, analyst Andrew Percoco wrote in a note to clients on Sunday, his first as the firm’s new head of Tesla coverage. “We see downsides to estimates, while the catalysts for its non-auto businesses appear priced at current levels.”
Percoco’s new price target on the stock of $425 implies a 6.6% decline from Friday’s close. He’s taking over for Morgan Stanley’s long-time Tesla analyst Adam Jonas, who had an overweight rating on the shares since September 2023, according to data compiled by Bloomberg. Percoco’s current rating is equal-weight. The average price target is $388, and the company now has 28 buy ratings, 19 holds and 16 sells.
The stock fell as much as 3% on Monday to trade around $441.
Percoco wrote that the company is positioned to be a leader in humanoid robots and sees its Optimus initiative as worth $60 per share. But he expects its EV sales volume to fall 12% in North America next year amid an industry-wide slump.
Tesla shares have largely shrugged off a slide in profits this year as Chief Executive Officer Musk has emphasized artificial intelligence efforts such as self-driving cars and humanoid robots. But it’s still been a volatile year for the stock, which is up around 10% this year after rising 63% in 2024 and 102% in 2023. The S&P 500 Index is up over 16% this year.
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Originally published at Bloomberg