Tesla Inc (NASDAQ:TSLA) shares slipped on Monday following Morgan Stanley’s downgrade of the stock from Overweight to Equal-Weight.

Tesla shares are retreating from recent levels. What’s pressuring TSLA stock?

What Happened: Morgan Stanley analyst Andrew Percoco downgraded Tesla to Equal-weight with a $425 price target, suggesting shares are fully valued, if not overvalued, at current levels. The downgrade is part of the firm’s 2026 auto industry outlook, which strikes a more cautious tone heading into next year.

“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. “However, high expectations on the latter have brought the stock closer to fair valuation. Looking out over the next 12 months we see a challenging catalyst path, with downside to consensus estimates, while positive catalysts for its non-auto business appear priced at current levels.”

Percoco stressed that while Tesla is more than just an automaker, meaningful upside will be hard to sustain without stabilization in its auto segment, which ...