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Wall Street Analysts Still Shy Away From Tesla Bandwagon

By Kim Khan - Tesla (NASDAQ:TSLA) shares fell in midday trading Thursday, which shouldn’t be a big surprise to anyone who’s been watching the stock lately.

The stock has nearly doubled in the last six months. Rallies do run out of steam and even the most bullish of bulls take some profits on a hot stock.

Shares were down about 3.4% due to a couple of reasons.

First, a report showed that the electric automaker’s sales in California nearly halved in the final quarter of 2019 as a ramp-up in tax credits for buyers of Tesla cars ended.

The second, a downgrade from Morgan Stanley (NYSE:MS) today, is more interesting.

Morgan Stanley (NYSE:MS) simultaneously downgraded the stock to underweight from equal weight and raised its price target to $360 per share from $250.

This kind of dichotomy happens when an analyst is caught flat-footed by a rally but still doesn’t like the stock, so the price target base is raised.

Morgan Stanley is still saying sell – its price target implies a drop of around 30% from where shares sit now around $500 – but don’t expect as much of a plunge as previously thought.

Here’s why Morgan analyst Adam Jonas said he is still pessimistic, according to

"We downgrade Tesla shares to Underweight from Equal-weight based on (1) valuation, (2) unfavorable risk-reward, and (3) risks to the long-term Chinese business that may not be fully appreciated by the market."

But Morgan Stanley isn’t alone among sell-side research in hesitation towards Tesla.

Among the 32 analysts polled by, 12 had a sell rating or equivalent on the stock, compared with 11 buy ratings. Nine of the analysts were neutral.

The average price target for the stock is $312.60, a drop of more than 37% from the current price.

The highest price target is $734, with the lowest at $200.

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