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Billionaire Elon Musk's electric-vehicle maker was downgraded to “underweight” by Morgan Stanley on Thursday, and 13 of 33 analysts tracking the stock now have a sell rating on it, according to Refinitiv data. Just a month ago, only one of 13 analysts recommended unloading the shares.
“Near-term momentum and sentiment around the stock is admittedly strong, but we ultimately question the sustainability of the momentum,” wrote Morgan Stanley analyst Adam Jonas.
Fueled by a surprise third-quarter profit, the new China Gigafactory going online and a record number of fourth-quarter deliveries, Tesla shares have more than doubled over the past three months.
Jonas pointed to Tesla’s valuation, unfavorable risk-reward and its China bull case being priced in as reasons for the downgrade.
“We are encouraged by Tesla’s execution and think it deserves to be among the world’s most valuable auto companies -- and is perhaps the most important auto company in the world given its electric-vehicle leadership,” Jonas wrote. “However, we think investors will be presented with more attractive opportunities to own the stock in the future.”
Alongside the downgrade, Jonas raised his price target to $360, still well below where the stock is trading now. Shares finished Wednesday’s session at $518.50.
On Jan. 7, Tesla became the biggest U.S. automaker in history, surpassing Ford’s 1999 peak market value of $80.8 billion. By Tuesday, its market capitalization had come within $3 billion of $100 billion and was bigger than Ford and General Motors combined.
Jonas believes Tesla’s enterprise value, or market capitalization plus debt, is about $75 billion – more than 41 percent below the $105.9 billion where it finished Wednesday.
Wedbush Managing Director Dan Ives, and many other Wall Street analysts, have said Tesla is more than just a carmaker.
It's a “disruptive technology company,” Ives told FOX Business’ Stuart Varney. “Anyone that defines it as an auto company, in my opinion, is wrong.”
Jonas disagrees, writing that nothing has occurred on a “fundamental basis in the past three months (which has coincided with a more than doubling of the share price) to convince us that Tesla should no longer be valued as an auto stock.”