First time in two years! Sky-high valuation causes concern as Morgan Stanley downgrades Tesla, Inc. (TSLA.US)

Morgan Stanley has downgraded Tesla, Inc. (TSLA.US) rating to "hold" level for the first time since June 2023, citing overvaluation of the company. The current price-to-earnings ratio of Tesla, Inc. stock is approximately 210 times the expected earnings for the next 12 months, making it the second highest market cap company in the S&P 500 index, second only to Warner Bros. Discovery (WBD.US) with a P/E ratio of 220 times, far ahead of the third-ranked Palantir (PLTR.US) with a P/E ratio of 186. Morgan Stanley stated that Elon Musk is eager to transform Tesla, Inc. into a Siasun Robot & Automation and artificial intelligence company, but the stock price of this electric car manufacturer already reflects these business contents, and its market value has reached a "fully valued level." Morgan Stanley analyst Andrew Percoco wrote in a report to clients on Sunday, "Although it is widely believed that Tesla, Inc. is not just a car manufacturer, we expect the stock performance in the next year to be quite volatile. We believe these forecasts are flawed, and the positives of its non-automotive business seem to have been fully priced in at the current valuation levels." This is his first report since taking over as the head of the Tesla, Inc. rating at Morgan Stanley. Percoco set a new target price of $425 for the company's stock. He took over the position from Adam Jonas, who had been a long-time Tesla, Inc. analyst at Morgan Stanley. According to collected data, Jonas has given the company's stock a "hold" rating since September 2023. Percoco's current rating is "hold." Currently, Tesla, Inc. has 28 "buy" ratings, 19 "hold" ratings, and 16 "sell" ratings, with an average target price of $388. The stock fell by 3% on Monday, trading at around $441. Percoco wrote that the company has the potential to become a leading player in the field of humanoid Siasun Robot & Automation, and he believes that its Optimus project is worth $60 per share. However, he predicts that due to the industry downturn, the company's electric vehicle sales in North America will drop by 12% next year. Although Tesla, Inc.'s stock price has faced profit declines this year, CEO Musk has highlighted efforts in areas such as autonomous vehicles and humanoid Siasun Robot & Automation in artificial intelligence. However, the stock's overall performance remains volatile, with a cumulative increase of about 10% this year, a 63% increase in 2024, and a 102% increase in 2023. The S&P 500 index has also risen more than 16% this year. Previously, prominent short seller Michael Burry also criticized the high valuation of Tesla, Inc. (TSLA.US). In a post, he called the electric car manufacturer "absurdly overvalued." He criticized the "sad calculation" based on stock compensation, using Tesla, Inc. as an example. He said that Tesla, Inc. dilutes its shares by 3.6% annually through issuing new stocks and does not engage in stock buybacks.