Tesla Market Outlook Shifts as Morgan Stanley Downgrades TSLA

Tesla market outlook turns cautious after Morgan Stanley downgrade, with analysts warning of earnings risks, rising EV competition, and a volatile year ahead

Tesla market outlook discussions intensified Monday after Morgan Stanley downgraded Tesla (TSLA), sending shares lower and shaking investor confidence. The bank cut its rating from overweight to equal-weight, even as it raised its price target from $410 to $425, signaling the firm sees limited upside in the near term.

In a note to clients, analysts led by Andrew Percoco reaffirmed Tesla’s position as a global leader in electric vehicles, renewable energy, manufacturing, and real-world AI. However, they cautioned that expectations—especially around AI—have grown so high that the stock now appears closer to “fair valuation.” By mid-afternoon trading, Tesla shares had fallen roughly 4% to about $437.

Analysts Expect a Volatile Year Ahead

The latest Tesla market outlook points to possible earnings challenges. Analysts warned Tesla could fall short on quarterly results due to ongoing weakness in its EV division. Slowing U.S. EV adoption and intensifying competition from Chinese brands remain key hurdles, suggesting Tesla’s trading environment in 2025 may be uneven.

Wall Street remains divided. Among 13 analysts tracked by Visible Alpha, six rate the stock a “buy,” four a “hold,” and three a “sell.” Despite the swings, Tesla is up less than 10% this year, underperforming major market benchmarks.

How Analysts Value Tesla’s Business Segments

Morgan Stanley broke down Tesla’s valuation into several components:

• EV business – $55/share (down from $75): Lowered sales forecasts stretching to 2040.
• Network services – $145/share: Includes full self-driving software, the Supercharger network, and service centers.
• Energy division – $40/share: Covers solar products and home battery storage, areas expected to grow with renewable-energy adoption.
• Mobility – $125/share: Analysts project 30,000 robotaxis on the road by 2030.
• Humanoids – $60/share: Tesla’s Optimus division could become a major revenue driver thanks to Tesla’s manufacturing and AI advantages.

Milestones and Future Expectations

A developing Tesla market outlook also includes expectations for CEO Elon Musk’s performance milestones. Analysts predict Tesla will achieve seven of the 12 approved goals—especially those tied to vehicles, robotaxis, and humanoid robotics. Profitability milestones are expected to be more difficult to hit.

Tesla shares are up 8% year-to-date but sit roughly 10% below last year’s all-time high. As uncertainties build, investors will be watching for the next major Tesla market outlook before making big moves.