Goldman Sachs and Morgan Stanley downgrade Tesla, saying the stock has gotten ahead of itself

Published Fri, Jun 12 20207:54 AM EDTUpdated Fri, Jun 12 20204:23 PM EDT

(This story is for CNBC PRO subscribers only.) Shares of Tesla have more than doubled this year, and two major analysts now say the stock has gotten ahead of itself. Morgan Stanley and Goldman Sachs both downgraded the electric vehicle maker on Friday saying the valuation appears stretched, while also pointing to headwinds including competition from Big Tech eyeing the autonomous vehicle industry. Morgan Stanley's widely followed auto analyst Adam Jonas said that while Tesla deserves most of its market cap, there are some headwinds and long-term risks that investors aren't pricing in. He cut the stock to underweight from equal-weight, and reduced his price target to $650 from $680. The lower price target is due to headwinds as the company gets its Fremont plant back up and running, as well as the recently announced vehicle price cuts, which Morgan Stanley had not yet factored into its forecasts. But there are also longer-term risks. Jonas pointed to US-China relations as well as competition from tech giants in the autonomous vehicle space. "In a post-COVID world, we believe fewer and more powerful players will be in position to deploy capital and talent to solving autonomy with a 'play to win' mindset," Jonas wrote in a note to clients. "We see Amazon (and other tech players) as clear competitors, not partners vs. the likes of Tesla and GM. We are watching the developments from some of the world's largest tech firms, many of whom have made strategic moves in transportation and mobility in recent weeks, with heightened interest," he added. Jonas' bull and bear case targets remain $1,200 and $190, respectively. The stock's valuation is the primary reason behind Goldman Sachs' downgrade. The firm lowered its rating to neutral, saying that it continues to be positive on the stock long-term, but that shares are trading above the firm's target. In tandem with the downgrade Goldman raised its 12-month target to $950 from $925, but the new price is still below the $982 level the stock closed at on Thursday. This week Tesla topped the $1,000 level for the first time on record. Goldman added the electric vehicle maker to its America's Buy list on April 14, and the stock has gained 37% since. "While Tesla has long been an expensive stock, and we recognize that valuation has expanded for the entire market, we believe that there is a higher bar for Tesla's fundamentals than for other stocks in our coverage given Tesla's premium absolute multiple along with its historically high volatility," the firm said. Goldman views the recent vehicle price cuts as a "modest negative" for the stock, and noted that shares are now trading "well above the historical median" for revenue. "We'd look to become more positive on Tesla stock again if we had more confidence in the near to intermediate term trajectory in fundamentals, or if valuation became more attractive," Goldman said. Tesla fell 3.86% on Friday. - CNBC's Michael Bloom contributed reporting.

A Tesla Model S is displayed during the London Motor and Tech Show at ExCel on May 16, 2019 in London, England.

John Keeble | Getty Images

(This story is for CNBC PRO subscribers only.)

Shares of Tesla have more than doubled this year, and two major analysts now say the stock has gotten ahead of itself. Morgan Stanley and Goldman Sachs both downgraded the electric vehicle maker on Friday saying the valuation appears stretched, while also pointing to headwinds including competition from Big Tech eyeing the autonomous vehicle industry.