Tesla Loses Key Bull Analyst: EV Giant Downgraded, While Rival GM Catches An Upgrade

Tesla Inc (NASDAQ:TSLA) shareholders may not love hearing that the electric vehicle stock has lost one of its top analysts. Morgan Stanley has assigned a new analyst to cover the stock, and he comes in hot with a downgrade on the stock.

• Tesla stock is among today’s weakest performers. What’s behind TSLA decline?

The Morgan Stanley Analyst: Morgan Stanley analyst Andrew Percoco has taken over coverage of the automotive sector, which was previously handled by Adam Jonas. Percoco announced several new ratings and price targets on stocks in the sector, including:

• Tesla: new rating Equal-weight (down from Overweight), price target $425 (up from $410)
• General Motors (NYSE:GM): new rating Overweight (up from Equal-weight), price target $90 (up from $54)
• Lucid Group (NASDAQ:LCID): new rating Underweight (down from Equal-weight), price target $10 (down from $30)
• Rivian Automotive (NASDAQ:RIVN): new rating Underweight (down from Equal-weight), price target $12 (in line with previous target)

Read Also: Tesla Q3 Highlights: Record EV Deliveries, Falling Profits, AI Ambitions Ahead

Morgan Stanley on Tesla: The electric vehicle giant was named the top automotive stock by Jonas for 2025. The analyst had held an Outperform rating since 2023 and had been bullish on many aspects of the company, including the new pay package for Tesla CEO Elon Musk.

Percoco has a different idea going forward, suggesting that the AI opportunity for the company is offset by automotive headwinds and a full valuation.

"With downside to consensus estimates driven by pressures in the auto business and catalysts for it non-auto business priced in at its current valuation, we assume coverage at Equal-weight with a $424 price target and wait for a better entry point," Percoco said.

The analyst said Tesla is a leader in electric vehicles, renewable energy, manufacturing, and real-world AI, which should give it a premium valuation.

"However, high expectations on the latter (AI) have brought the stock closer to fair valuation."

The analyst sees challenging catalysts for Tesla going forward, which could provide downside to estimates.

"We believe it will be increasingly challenging to support meaningful upside to Tesla shares barring an improvement, or at least stabilization, within its auto business."

Along with the base case price target of $425, Percoco has a bull case valuation of $860 and a bear case valuation of $145 on Tesla stock.

Morgan Stanley on General Motors: While Percoco sees Tesla stock less favorable than Jonas, the new automotive analyst for Morgan Stanley sees a brighter short-term future for General Motors.

"Over the course of the last year, GM made strides in realigning their capital allocation strategy with a more tempered EV and AV growth curve," Percoco said.

The analyst said General Motors could benefit from reduced policy uncertainty, the ending of EV tax credits, and reductions in emissions-related requirements.

"We expect GM to manage through with an appropriately re-aligned capital allocation strategy and refreshed product lineup highlighting strength in GM's core ICE trucks and SUVs."

Percoco said investors could see a "prolongation of ‘ICE is Nice' narrative" for traditional automakers.

"As a result of easing compliance requirements, OEMs can leverage consumer preference for higher-value ICE and hybrid vehicles."

A shift back to ICE vehicles by consumers in 2026 could be a tailwind for General Motors.

While neither company has completely abandoned its electric vehicle presence, changes to growth plans and focusing on ICE vehicles could pay off in the short term, according to Percoco.

Morgan Stanley on Auto Sector: The analyst expects electric vehicle volume to be down 20% year-over-year in the United States for 2026, painting a cautious outlook on the pure-play EV companies like Tesla, Rivian and Lucid.

The analyst forecasts ICE vehicle sales in the U.S. market to be up 1% year-over-year in 2026.

"Position your portfolio toward best in class operators that can navigate a slower industry outlook by allocating capital effectively with a strong execution track record (General Motors)," Percoco said.

The analyst warned investors to "be wary" of companies facing industry headwinds, such as EV deceleration.

GM, TSLA Price Action: General Motors stock is down 0.5% to $75.69 on Monday versus a 52-week trading range of $41.60 to $77.00. General Motors shares are up 47.3% year-to-date in 2025.

Tesla stock is down 3.6% to $438.84 on Monday versus a 52-week trading range of $214.25 to $488.54. Tesla shares are up 15.6% year-to-date in 2025.

Read Next:

• General Motors, Ford Hit Record EV Deliveries In Q3: Tax Credit Expiration Or Lasting Growth?

Image created using artificial intelligence via Gemini.