Tesla Stock’s Best Run Since 2020 Is Spoilt by Wall Street Downgrades

  • Tesla shares have soared since April, pushing the EV maker’s valuation above $750 billion.
  • But Wall Street is starting to shift to a more cautious outlook for the stock.
  • Goldman Sachs, Morgan Stanley, and Barclays have all warned that Tesla’s massive rally could make it overvalued.

Tesla’s stock price has been rallying non-stop for months – and Wall Street is starting to ponder whether that breakneck surge might’ve made the EV stock a little overvalued.

Shares have jumped 57% since late April, with investors cheered by CEO Elon Musk signing charging deals with Ford and GM, while Big Tech stocks have also soared more broadly thanks to the rise of AI as an investment theme.  The stock is poised for its best two-quarter advance since 2020, rising 96% so far this year.

Those gains have pushed Tesla’s total market capitalization to $764 billion, according to data from Refinitiv.

But Barclays, Morgan Stanley, and Goldman Sachs have each questioned that valuation over the past week, with all three banks slashing their Tesla rating from “buy” to “hold”.

The UK bank fired the starting gun on the flurry of downgrades, with analyst Dan Levy saying Wednesday that investors should take the opportunity to sell some of their shares. The stock has pulled back 13% from recent highs after Barclays flagged overvaluation risks on Monday, wiping out over $100 billion worth of market cap.

“The stock’s recent rally can be best explained by the market’s current AI-driven thematic trade, as well as excitement over recent announcements to open the Tesla Supercharger network to other brands,” he wrote in a note to clients. “Yet while we aren’t surprised that the stock has participated in the rally, we believe it is prudent to move to the sidelines.”

Morgan Stanley’s longtime Tesla bull Adam Jonas echoed those sentiments the following day, arguing that Musk’s high-profile EV price war, which it has pressed ahead with since late 2022 in a bid to revive faltering demand, will drag down earnings and the company’s share price.

Goldman then weighed in with its own downgrade Monday, with strategists writing in a note to clients that “valuation is full” because Tesla trades at a higher price-to-earnings ratio than rivals like Nvidia and Advanced Micro Devices.

The early signs suggest investors agree with the Street – and are starting to sell some of their shares in order to take profits from Tesla’s sizzling rally.

Read more: ‘Valuation is full’: Goldman Sachs downgrades Tesla stock after its 105% year-to-date surge

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