Tesla Inc. shares
have surged 36% in the past month amid positive delivery numbers and increasing optimism from some analysts, but Morgan Stanley threw cold water on the Tesla bull case Thursday. Analyst Adam Jonas downgraded the stock to underweight from equal weight, writing of his concerns around valuation and underappreciated risks to the company’s China business. The stock is off about 4% in premarket trading. “Near-term momentum and sentiment around the stock is admittedly very strong but we ultimately question the sustainability of the momentum,” he wrote. Jonas argued that the bull case in China is already priced into Tesla’s stock, which has doubled on a three-month basis as the S&P 500
has added 10%. “We continue to harbor concerns about whether an auto business commercializing advanced, dual-purpose technology in economically sensitive industries could be a long-term winner in the Chinese market,” he wrote. This is a risk not just to Tesla, but also to other automakers in his coverage universe, including Ford Motor Co.
and General Motors Co.
Jonas upped his price target to $360 from $250 in conjunction with the downgrade, reflecting the stock’s big run up in recent weeks.