The company Morgan Stanley has changed its valuation of Tesla and has downgraded the equity rating to Question Mark. The new rating reflects the expectation of the firm that the current market valuation of Tesla already reflects a significant part of its future potential.
Its adjustment is made after Andrew Percoco replaced Adam Jonas as the firm’s lead Tesla analyst, and the latter will now focus on physical and embodied artificial intelligence research at the company.
At the same time, Morgan Stanley raised its price target to $425 per share, compared to its previous price target of $410 per share; however, after the revision, the company still regards a slight downside compared to the existing trading prices.
The general evaluation reports that Tesla has maintained a leadership role in the electric vehicle and artificial intelligence sectors, although it is mentioned that the share price has risen at an excessive rate.
Why Morgan Stanley doesn’t have a lot of Upside in the Near Future
Percoco and his associates recognize the leader in electric vehicles, renewable energy, and applied AI, Tesla. However, they argue that the market players have already factored in the healthy growth of Tesla’s nascent projects, robotaxis, network services, and humanoid robots, in such a way that any unexpected slowdown would put pressure on the shareholders.
The analysts forecast a volatile future for Tesla stakeholders in the next year due to increased risks in the automotive sector of the company. In that regard, they have adjusted future projections of vehicle deliveries down to 1.6 million in 2026, which includes slower electric-vehicle adoption in the world and the ongoing competition.
The changed perspective has led to a decrease in the automotive valuation to 55 per share.
FSD Remains the Crown Jewel
Despite the systems that have softened the automotive forecast, Morgan Stanley claims that Tesla has a massive potential in its software and network services. The analysts still describe Full Self-Driving as the crown jewel of the automotive product and expect high long-term FSD adoption rates and higher average revenue per user.
These metrics alone add an estimated value of 145 per share to the overall value. The team also increased anticipations of the future development of robotaxi use, but they warn that the time-consumption of such deployment is extensive and will need regulation requirements.
Huge Prospects in Robotics though with Reservations
One of the salient aspects of the new analysis is related to the price of the Optimus humanoid robot project. Morgan Stanley values Optimus to have a value of 60 per share, which is adjusted with the estimated market size of the global humanoid market.
The company believes that Tesla has an advantage in artificial intelligence and production capacity that will see it become one of the strongest robotics competitors.
However, analysts point to high degrees of uncertainty. As a result, they use a 50% probability discount on the humanoid valuation, which indicates a lack of clarity in terms of the speed of execution by Tesla and the rate at which the humanoid robots will be adopted in the market.
High Diversity of possible outcomes
Morgan Stanley highlights that there is a significant dispersion in the long-term results of Tesla. The institution projects an 89% upside in its bullish scenario and a 70% downside in its bearish forecast, reflecting the extent of reliance on the ability of Tesla to achieve its grand goal in AI software, and robotics.
To date, the company would rather wait until a more desirable valuation is achieved. Although Tesla still has considerable long-term potential, Morgan Stanley argues that the equity already has a large share of optimism.
