Morgan Stanley analyst Adam Jonas believes Tesla’s recent gains disproportionately reflect excitement about the stock’s artificial intelligence. On Thursday, the longtime Tesla bull downgraded the electric automaker’s stock to “equal weight” from “overweight.” He did raise his price target to $250 a share, but that would imply a 3.6% downside from Wednesday’s close. The stock is up more than 32% in the past month alone and nearly 111% since the start of the year. “I have to be honest. While the team has defended Tesla’s OW rating all year, I don’t see a 111% year-to-date gain (for context, the S&P 500 is up 14% year-to-date) ,’ said Jonas. “We’re not trying to call the Tesla rally ‘over,’ and from our discussions we continue to see investor skepticism/lack of exposure to the name.” Since early 2023, Tesla shares have risen nearly 111%. Jonas said the current share price reflects a “more balanced risk/reward” skew, while Tesla is benefiting from an explosion in artificial intelligence stocks, which has driven the electric car maker to a higher valuation. While Jonas sees Tesla as an AI company as much as a car company, its edge from the AI boom may have run out of steam. “While the market may be hoping to dream of an artificial intelligence theme, we’re ready to wake up to blaring car horns,” Jonas said, adding that Morgan Stanley still expects the company’s earnings forecast to There would be a “major negative correction” and pointed to a lack of guidance on whether Tesla had ended price cuts on key models. This marks the second time in two days that a major Wall Street bank has downgraded Tesla. On Wednesday, Barclays downgraded the stock to Equal Weight from Overweight, noting, “While we are not surprised the stock has participated in the rally, we believe it is prudent to wait and see.” — CNBC’s Michael Bloom contributed to this report.
