Tesla loses bull rating at Morgan Stanley with AI premium seen at risk
Justin Sullivan
Morgan Stanley downgraded Tesla (NASDAQ:TSLA) on Thursday to an Equal Weight rating from Overweight on its view shares are now fairly valued following the recent rally sparked by AI enthusiasm.
While Adam Jonas noted some investors may feel inclined to play the positive momentum from here, he believes the current share price discounts significantly more than Tesla as just a dominant electric vehicle company.
"Following Nvidia's blowout quarter, AI exposed stocks have outperformed broadly and investors are constructing portfolios with exposure to the theme. While we understand why Tesla gets a serious mention in an AI conversation, we believe a re-rating on this theme is in the realm of the non-disprovable bull case. Autonomous driving and generative AI still remain, in our view, two very different technological disciplines. While the market may want to dream on the AI theme, we'd prepare to wake up to the sound of a blaring car horn."
On the earnings front, Jonas and team have a 2023 EPS estimate on Tesla (TSLA) of $3.03, which is below the consensus mark of $3.33. 
Morgan Stanley raised its base case price target on Tesla (TSLA) to $250 from $200, while the bear case valuation went to $90 from $70 and the bull case valuation was lifted to $450 from $390. 
On Wall Street, the ratings scorecard show 16 Buy-equivalent ratings vs. 17 Hold-equivalent ratings and 5 Sell-equivalent ratings. Barclays shed its bull rating on Tesla (TSLA) on Wednesday.
Shares of Tesla (TSLA) fell 3.05% in premarket trading to $251.55 after shedding 5.46% on Wednesday.
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