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Tesla Stock Dips 3% as Analyst Sees Volatility in EV and Energy Segments
Tesla Stock Outlook – Morgan Stanley has made a notable shift in its stance on Tesla (TSLA), with its newest analyst, Andrew Percoco, downgrading the stock to Equal-weight from Overweight. This reversal follows the departure of prior Tesla analyst Adam Jonas, who had maintained a bullish position on the EV giant. Interestingly, despite the downgrade, Percoco raised Morgan Stanley’s Tesla price target from $410 to $425, reflecting a nuanced view of the company’s diversified business lines.
Percoco explained that high expectations around Tesla’s AI initiatives have contributed to a premium valuation. “While it is well understood that Tesla is more than an auto manufacturer, we expect a choppy trading environment for the TSLA shares over the next 12 months, as we see downside to estimates, while the catalysts for its non-auto businesses appear priced at current levels, driving our EW rating,” he noted.
Following the announcement, Tesla shares fell over 3% on Monday.
A Sum-of-the-Parts Approach to Valuation
Percoco’s analysis reflects a sum-of-the-parts valuation approach. While he maintained caution around Tesla’s auto and energy businesses, he added roughly $60 per share in equity value stemming from Tesla’s humanoid robotics business, highlighting the growing importance of the company’s AI-driven initiatives.
Specifically, Percoco moderated outlooks for Tesla’s auto segment, projecting a 10.5% reduction in U.S. vehicle volumes by 2026 and an 18.5% reduction in cumulative deliveries through 2040. These adjustments stem from a more cautious view of the pace of EV adoption in the U.S. alongside rising global competition in the EV market.
Tesla’s Non-Auto Ambitions Remain Strong
Despite the downgrade, Percoco remains bullish on Tesla’s embodied AI initiatives, including Full Self-Driving (FSD), robotaxis, and Optimus robots. “Full Self Driving (FSD) is the crown jewel of Tesla’s auto business. We believe that its leading-edge personal autonomous driving offering is a real game changer, and remains a significant competitive advantage over its EV and non-EV peers,” Percoco said.
Regarding Tesla’s robotaxi program, Percoco forecasts around 33 new service launches across the U.S. in 2026, a notable increase from the approximately 11 expected in 2025. Planned expansions include Austin, the San Francisco Bay Area, Nevada, and Arizona, marking a significant step forward for Tesla’s autonomous mobility ambitions.
Regulatory and Technical Challenges Ahead
Percoco highlighted potential regulatory hurdles and technical scaling challenges for Tesla’s robotaxis. Unlike competitors such as Waymo, which use a combination of cameras and sensors to perceive road conditions, Tesla relies on a vision-only system, which could be impacted by adverse weather such as snow or heavy rain. These factors could slow deployment and scaling of Tesla’s robotaxi network despite strong demand and technological advances.
The Legacy of Adam Jonas’ Bullish Outlook
Adam Jonas, Percoco’s predecessor, had driven a highly bullish narrative on Tesla, emphasizing not only the company’s auto business but also its AI-driven innovations. Jonas considered Tesla’s embodied AI initiatives—including FSD, Optimus robots, and robotaxis—as central to its long-term valuation. Percoco retains a similar optimism about these segments but tempers expectations with caution around traditional auto and energy operations.
Balancing AI Potential With Auto Market Realities
Morgan Stanley’s revised stance represents a delicate balance between Tesla’s cutting-edge AI ambitions and short- to mid-term challenges in its auto business. While the firm acknowledges the premium valuation of Tesla’s AI initiatives, it expects a volatile trading environment for TSLA shares over the next year.
Percoco’s forecast underscores the complex landscape Tesla faces: on one hand, AI and robotics open new growth avenues, while traditional EV sales face global competition and adoption uncertainties. Investors and industry observers will be watching closely to see how Tesla navigates this duality in the coming years.
AI Drives Optimism, Auto Pressures Temper Confidence
In summary, Morgan Stanley’s downgrade of Tesla does not signal pessimism about the company’s AI-driven future. Rather, it reflects a realistic view of the auto and energy business combined with cautious optimism on high-potential segments like FSD, robotaxis, and humanoid robotics. The firm’s $425 price target signals belief in Tesla’s long-term growth story, even amid near-term volatility and evolving market conditions.
Tesla’s journey highlights the tension between traditional EV metrics and innovative AI-powered initiatives, a narrative that will continue to shape investor sentiment and industry expectations throughout the next decade.
