Tesla Inc. (TSLA) fell in after-hours trading following a downgrade by a new Morgan Stanley analyst, who cited elevated valuation metrics as the primary concern. The move reflects growing scrutiny of the electric vehicle leader's stock price relative to earnings potential.
- Tesla (TSLA) stock dropped 4.3% in after-hours trading.
- Morgan Stanley analyst assigned a 'underperform' rating based on valuation concerns.
- Tesla’s forward P/E ratio stands at 68.5x, well above sector and index averages.
- Q3 2025 delivery growth slowed to 6%, down from 12% in Q2.
- Revenue rose 14% YoY but margins faced pressure from global competition.
- The downgrade reflects growing skepticism over premium valuations in EV sector
Tesla's stock declined by 4.3% in extended trading on Monday after a newly assigned Morgan Stanley analyst issued a 'underperform' rating on the shares. The analyst, whose coverage began in December 2025, highlighted that Tesla's current price-to-earnings ratio of 68.5x for forward earnings is significantly above both the S&P 500 average of 22.3x and the broader automotive sector median of 18.7x. Despite the company's revenue growth of 14% year-over-year in Q3 2025, the analyst noted that margin pressures and slowing vehicle delivery growth—up just 6% in the quarter—undermine the premium valuation. The downgrade comes amid increasing competition from legacy automakers and Chinese EV producers, which are eroding Tesla's market share in key regions like Europe and China. Institutional investors are now reassessing the stock’s long-term growth trajectory, particularly as capital deployment shifts toward AI and robotics initiatives under CEO Elon Musk. The move signals a potential shift in sentiment toward more conservative valuation metrics in the tech-heavy auto sector.