Why Tesla stock is sliding over 3% on Monday

Tesla stock fell sharply on Monday after Morgan Stanley stepped out of the bull camp, with its new lead analyst arguing that the company’s valuation has run ahead of fundamentals.

The decline also followed a shift in coverage responsibilities, as longtime Tesla watcher Adam Jonas moved away from autos to focus on “embodied AI.”

Shares of Tesla were down 3.4% at $439.52 in early Monday trading. By contrast, the S&P 500 was down 0.3% while the Dow Jones Industrial Average was trading 0.4% lower.

Morgan Stanley on Tesla stock

Morgan Stanley analyst Andrew Percoco, who took over automotive coverage from Jonas, downgraded Tesla to equal weight from overweight.

Percoco lifted his price target to $425, a $15 increase, but the estimate still represents around 6% downside from Friday’s close.

“Tesla is a clear global leader in electric vehicles, manufacturing, renewable energy, and real-world AI and thus deserving of a premium valuation,” Percoco wrote in a Sunday note.

“However, high expectations on the latter have brought the stock closer to fair valuation.”

Percoco highlighted that Tesla shares are trading at roughly 30 times Morgan Stanley’s EBITDA estimate for 2030.

Combined with what he described as expected underperformance relative to consensus over the next 12 months, he said he would “wait for a better entry.”

The downgrade makes Percoco one of the minority voices on Wall Street.

Despite recent volatility, most analysts still have a strong buy or buy rating on the stock, according to LSEG.

Percoco also signalled that he expects a “choppy trading environment” for Tesla over the next year.

Tesla shares have gained more than 12% year-to-date, underperforming both the S&P 500 and Nasdaq Composite.

Morgan Stanley had maintained an overweight rating since September 2023.

Jonas, one of Tesla’s most prominent bulls for more than a decade, has moved into a new role at the firm that focuses on AI rather than autos.

Tesla rolls out major 2025 holiday update

Separate from Monday’s market reaction, Tesla also unveiled its 2025 holiday software update — one of the largest the company has issued.

The update, which Tesla said will roll out “shortly,” includes new navigation, charging, and user-interface capabilities alongside the usual entertainment additions.

The most notable new feature is Grok with Navigation Commands. According to Tesla, “Grok can now add & edit navigation destinations, becoming your personal guide.”

Users must set Grok’s personality to “Assistant” to enable the function.

Other navigation upgrades include the ability to set Home, Work, and other favourites by dropping a pin directly on the map.

Suggested destinations will now appear based on a driver’s recent trips and habits, but will only be shown while the vehicle is parked.

Tesla also added optional automatic HOV lane routing. The system will select the carpool lane “when eligible, based on time, location, passenger count & road restrictions.”

Charging enhancements include the ability to set a location-specific charge limit, enabling different presets for home, work, or public charging locations.

In addition, some Supercharger sites will now display a 3D layout map when drivers tap “View Site Map,” allowing users to choose a preferred stall before arriving.

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