Have you ever watched a stock you love climb so high that even the biggest bulls start rubbing their eyes and asking, “Wait… is this for real?” That’s exactly where we are with Tesla right now.
Last night, in a note that landed like a small thunderclap on trading desks, Morgan Stanley’s brand-new Tesla analyst did something pretty rare these days: he downgraded the stock. Not because he hates the company — far from it — but because he thinks the price has simply sprinted ahead of even the most optimistic story.
A Changing of the Guard at One of Wall Street’s Most-Watched Desks
For years, the name most investors associated with Tesla coverage at Morgan Stanley was Adam Jonas — the eternal optimist who stuck with an overweight rating through thick and thin since late 2023. When Jonas recently stepped into a broader AI-focused role, the baton passed to Andrew Percoco. And Percoco wasted no time putting his own stamp on the franchise.
On Sunday evening he flipped the rating from overweight to equal-weight and, yes, actually raised the price target by fifteen bucks to $425. That sounds bullish until you realize the stock closed Friday well north of $450. In plain English: he sees roughly 6% downside from here.
In my experience, when a new analyst takes over a high-profile name, the first call is almost ceremonial — keep the rating, tweak the model a little, and move on. Doing an immediate downgrade takes guts. Clearly Percoco believes the valuation gap has become impossible to ignore.
The One Number That Made Him Blink
Percoco’s core argument boils down to a single, eye-watering metric: Tesla is currently trading at about 30 times the firm’s 2030 EBITDA estimate.
Let that sink in for a second. We’re pricing in earnings that are five years away — and doing it at thirty times. Even for a company many of us believe will dominate multiple industries, that’s a lot of perfection baked in.
“Tesla is a clear global leader in electric vehicles, manufacturing, renewable energy, and real-world AI and thus deserving of a premium valuation. However, high expectations on the latter have brought the stock closer to fair valuation.”
– Andrew Percoco, Morgan Stanley
He’s not saying the story is broken. He’s saying the market has already paid for most of the good news — and then some.
Why the Timing Feels So Jarring
Tesla shares are still up more than 12% year-to-date in 2025, but that actually counts as underperformance when the S&P 500 and Nasdaq are both posting stronger gains. After the post-election surge that carried the stock to all-time highs, a lot of momentum players were looking for the next leg up.
Instead, they got a respected sell-side voice basically saying: maybe chill for a minute.
Percoco expects the next twelve months to be “choppy.” Deliveries might miss the street’s aggressive numbers, margins remain under pressure from price cuts and mix, and the big optionality stories (robotaxi, Optimus, energy storage megapacks) still need serious proof points before they move the needle in any material way.
Putting the Valuation in Perspective
Let’s play with some rough math to see why 30× 2030 EBITDA feels stretched to a lot of traditional investors.
Suppose Tesla grows EBITDA to roughly $50 billion by 2030 — an aggressive but not insane assumption if robotaxi and energy take off. Thirty times that number gives you a $1.5 trillion enterprise value. The company is already knocking on $1.4 trillion today. In other words, the market is paying almost full price for a best-case outcome five years out, while near-term earnings are still expected to be relatively modest.
- 2025 consensus EBITDA: around $18–20 billion
- Current enterprise value: ~$1.35 trillion
- That’s already 70× this year’s number
- And still 30× a very bullish 2030 figure
When you see it laid out like that, it’s easier to understand why even someone who likes the long-term story might prefer to wait for a better entry point.
Where Tesla Still Has Room to Surprise
None of this means the bull case is dead. Far from it. There are still several catalysts that could prove the skeptics wrong — maybe spectacularly so.
- Full Self-Driving progress: A meaningful leap in unsupervised miles could re-rate the entire company overnight.
- Robotaxi day (whenever it actually happens): Concrete details on economics and regulatory path would be massive.
- Energy storage explosion: Megapack deployment is scaling faster than almost anyone predicted a couple of years ago.
- Optimus humanoid robot: Still science fiction to many, but a working prototype doing useful tasks would flip narratives again.
- Next-gen platform: The rumored $25,000 vehicle could reopen emerging-market volume growth.
The problem? The stock has already priced in a fair amount of success on most of these fronts. That leaves less margin of safety than we’ve seen in years.
How the Street Is Positioned Now
Despite the headline, Morgan Stanley’s $425 target actually sits well above the current consensus of around $375. In other words, Percoco is still more bullish than the average analyst — he just doesn’t think “more bullish” justifies owning the stock at current levels.
Most of Wall Street remains in the buy or strong-buy camp. Sentiment is still heavily tilted positive. That’s both a blessing and a curse: it means downgrades like this one stand out, but it also means there’s a crowd that could head for the exits if the narrative cracks.
What Should Investors Actually Do?
Here’s my personal take after watching Tesla for the better part of a decade: the stock has always been a battle between narrative and numbers. Right now the narrative is as strong as ever — maybe stronger — but the numbers are starting to push back.
If you’re a long-term believer who isn’t leveraged and can stomach 20-30% drawdowns the way we’ve seen many times before, nothing has fundamentally changed. Tesla could still compound at high rates for many years.
But if you’re someone who bought heavily in the past six months chasing momentum, or you’re sitting on big gains and never locked any in, this note is a gentle reminder that even the most beloved growth stories go through reality checks.
Sometimes the smartest move is simply to zoom out, remind yourself why you own something, and decide whether you’re still being compensated for the risks.
Final Thoughts
Morgan Stanley’s downgrade isn’t a death knell for Tesla. It’s a grown-up acknowledgment that leadership in EVs, energy, and AI doesn’t automatically mean infinite valuation multiples.
In a market that’s increasingly obsessed with immediate AI payoffs, Tesla remains one of the few companies with a realistic shot at owning huge chunks of that future. But getting from here to there will probably be messier, slower, and more volatile than the current price suggests.
For now, the easy money might be made. The next chapter will likely require real operational execution rather than just vision. And history tells us Tesla is capable of exactly that — eventually.
Whether you choose to ride through the choppiness or wait on the sidelines, one thing is clear: even the bulls are starting to watch the price tag. And in this market, that’s worth paying attention to.
