Morgan Stanley Analyst Says Tesla Will Drop

According to a Morgan Stanley analyst, Tesla is expected to drop 40%.

Analyst Adam Jonas reiterated a $250 price target for Tesla stock. If this price hits, it would cut the electric vehicle maker’s valuation by about 40%.

Shares of Tesla have been on a rampage in the last three months and even saw new heights, passing the $420 target that Musk had in the past said was the per share takeout value.

According to Jonas however, the stock will likely continue to rise as the company reaches milestones, but that long term the stock will prove to be overvalued for a car manufacturer.

Tesla is currently trading at an outsized value for an autos manufacturer, says Jonas. The analyst said that investors will eventually cease to view Tesla as a tech company and send the stock plummeting to levels comparable to others in the autos industry.

“We are not bullish on Tesla longer term, especially as, over time, we believe Tesla could be perceived by the market more and more like a traditional auto OEM,” Jonas wrote on Monday. “We are prepared for a potential surge in sentiment through 1H20 but question the sustainability.”

Morgan Stanley has an “equal-weight” rating on the stock.

Disclaimer: We have no position in Tesla Inc. (NASDAQ: TSLA) and have not been compensated for this article.