Tesla (TSLA) stock experienced a second downgrade in as many days, as analysts express concerns over diminishing consumer demand and growing competition globally. Following a 5.5% dip on Wednesday, the stock managed a slight recovery on Thursday.
Morgan Stanley downgraded Tesla from overweight to equal weight on Thursday, while raising its share price target to 250, up from 200. This adjustment is approximately 3% below the closing price on Wednesday. This downgrade follows Barclays’ decision to downgrade Tesla on Wednesday.
Barclays noted that Tesla is viewed as both an artificial intelligence (A.I.) beneficiary and an automobile company. Morgan Stanley, on the other hand, believes that high expectations regarding A.I. have led to Tesla’s stock reaching a fair valuation.
Morgan Stanley analyst Adam Jonas clarified that the downgrade does not indicate the end of the Tesla rally. He emphasized the significant degree of investor skepticism and lack of exposure surrounding the company. Jonas added that despite the downgrade, Tesla remains a “must own” in an electric vehicle (EV) portfolio and a standard-bearer for electric transport and renewable energy.
However, Morgan Stanley predicts negative revisions for Tesla’s consensus earnings forecasts, anticipating intensifying competition from Chinese EV players and declining consumer demand for automobiles. Jonas projects a bull case scenario where Tesla stock reaches 450 and a bear case scenario where it falls to 90 over the next 12 months.
During market trade on Thursday, Tesla stock initially dropped, only to recover around 2% and settle at 264.46. The previous day, the stock experienced a 5.4% slump to 259.46. Prior to this, on Tuesday, shares surged by 5.3% to 274.31.
Despite its recent volatility, TSLA has shown considerable growth, with a 30% increase in June alone. Last week, the stock rose over 6% despite consecutive sessions with losses. However, Tesla is currently down approximately 36% from its all-time high of 414 in November 2021.