Morgan Stanley delivers blunt message to Tesla stock investors

Tesla’s (TSLA) recent drop has investors asking the tough questions, but Morgan Stanley analyst Andrew Percoco has a clear response. 

The bank reiterated an equal-weight rating on the stock while keeping its $415 price target, a 17% upside from current levels.

Tesla stock, though, has been under duress of late after a major delivery miss in Q1, rattling confidence, sparking concerns over demand and margins.

On top of that, there’s a new wrinkle.

Tesla’s energy storage business, which has performed consistently over the years, also disappointed. Coupled with a steep drop in deliveries, it was enough to shake investor sentiment.

Percoco isn’t the only analyst bullish on Tesla’s long-term case. As I covered recently, Wedbush analyst Dan Ives stood by a $600 price target, despite Tesla’s delivery and energy storage miss. 

Long-time Tesla bull Ives said the sluggishness reflects broader EV softness and Tesla’s strategic shift, not a broken story.

However, Morgan Stanley isn’t ready to turn bearish yet.

The firm argues that the recent sluggishness, particularly in the energy storage segment, may be due more to timing than a true slowdown.

The bigger story, it says, is still ahead.

Tesla stock returns vs. the S&P 5001W: Tesla -2.43% versus the S&P 5004.30%1M: Tesla -12.62% versus the S&P 500 -1.83%6M: Tesla -23.52% versus the S&P 500 -1.83%YTD: Tesla -22.92% versus the S&P 500 -3.34%1Y: Tesla 44.78% versus the S&P 500 30.40%3Y: Tesla 87.32% versus the S&P 500 61.19%5Y: Tesla 50.36% versus the S&P 500 62.42%10Y: Tesla 1,859.06% versus the S&P 500 220.17%
Source: Seeking Alpha
Tesla Q1 deliveries and energy storage update

Tesla’s Q1 update showed improvements from a year-over-year perspective, but it tracked comfortably behind what Mr. Market had been looking for. 

Tesla delivered 358,023 vehicles in Q1 2026, Reuters reported, up 6.3% from 336,681 in the prior-year period, but below the 368,903Wall Street estimate and Tesla’s own estimate of 365,645.Production reached 408,386 vehicles, leaving Tesla with 50,363 vehicles produced but not delivered in the quarter, raising concerns about near-term demand and inventory levels.
Moreover, as GuruFocus notes, Tesla’s current days’ inventory ratio stands at 61.01, above its 10-year median of 57.82, suggesting that inventory is building relative to demand.
Energy storage was a laggard as well, with deployments of 8.8 GWh, down from 10.4 GWh in Q1 2025 and behind Tesla’s consensus estimate of 14.4 GWh.Additionally, storage deployments fell 15.4% year over year, underscoring the breadth of the miss across Tesla’s Q1 update.

Morgan Stanley reiterates its neutral rating on Tesla, keeps its $415 target, and highlights Robotaxi progress as a key catalyst.

Harnik/Getty Images

Why Morgan Stanley isn’t panicking on Tesla stock

Morgan Stanley’s view is a lot more nuanced than the market’s reaction.

Though Tesla’s latest figures are soft and the delivery miss adds new pressure, analyst Peroco says investors are focusing too much on a weak quarter.

Instead, he feels it’s a lot wiser to focus on the bigger forces shaping the stock.

The energy-storage miss looks more like a delay than a miss. Tesla’s energy storage deployments came in below analyst expectations, marking the first year-over-year decline in the segment since 2022. Percoco feels it’s “far too early” to call it a trend, saying that project timing played a critical role in shaping the results.Demand drivers are in place. Morgan Stanley underscores improving economics in utility-scale storage, along with growing demand from data centers. So despite the near-term weakness, the broader demand backdrop looks robust. Autonomy is the real stock catalyst. Percoco lays out the case that Tesla’s ability to scale an unsupervised Robotaxi fleet is at the heart of the EV giant’s valuation.
Consequently, he is watching Austin closely, along with seven new city launches expected by the end of June, as signals that Tesla’s next leg of expansion would most likely come from software and autonomy.
Investor takeaway on Tesla stock

It’s best to tread carefully with Tesla stock at this point.

From a technical perspective, according to Seeking Alpha, the stock trades at 5.58% below the 10-day moving average, 13.23% below the 50-day, 17.65% below the 100-day, and 12.73% below the 200-day.

Clearly, that underscores broad-based technical sluggishness, with short-, medium-, and long-term trends all working against the stock.

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At the same time, valuation doesn’t offer much comfort, either.

Tesla’s non-GAAP trailing P/E is 211.27, compared to the sector median of 15.01, and its forward P/E is 171.41 compared to 15.03 for the sector.

The numbers show that investors are still paying a ton for each dollar of profit, pricing in plenty of future growth.

Moreover, Tesla trades at 13.66 times sales compared to the sector median at 1.30, underscoring the same trend.

Given the current setup, it’s probably wise to wait for better technical support or build a position slowly, as Tesla stock still trades at a hefty premium. 

Wall Street price targets for Tesla stockAverage Wall Street price target: $416.15, implying 20.05% upside, with a high target of $600 and a low target of $125Wedbush: $600Baird: $538Mizuho: $540RBC Capital: $500Truist Securities: $438Morgan Stanley: $415
Source: Benzinga

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