Tesla Stock Downgraded Again Amid Michael Burry Valuation Concerns

• Tesla trades at 307x trailing P/E as valuation debates intensify.

• Morgan Stanley downgraded Tesla to equal weight citing EV headwinds and robotaxi timeline uncertainty.

• Still, Piper Sandler believes FSD is very close to achieving unsupervised self-driving.

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Tesla (NASDAQ:TSLA) stock has been so incredibly resilient despite all the volatility facing big tech and fears over what could happen to the broad market if AI demand were to suddenly fall off. With Dr. Michael Burry expressing his belief that shares of the electric vehicle firm are “ridiculously overvalued,” while some sell-side analysts downgrade, citing similar valuation concerns, it’s becoming difficult to justify holding on while shares are just north of the $450 per-share mark.

Undoubtedly, Elon Musk has many fans, and many shareholders believe in his vision for the future. If Musk is to get Tesla stock moving higher again, the firm will need to hit the spot on robotics with Optimus while moving at full speed with robotaxis.

Though it’s tough to tell how far along Tesla’s FSD (full self-driving) innovation is, or how long it’ll be before Optimus starts autonomously serving drinks at the local bar, there seems to be quite a divide between the bulls and the bears, or the believers and the skeptics.

Of course, Elon Musk is not a man to doubt, but the valuation is getting harder to justify, especially if it takes many years longer for robotics, self-driving cars, and all the sort to really come into their own. Personally, I share the same valuation concerns that Burry and one big-name analyst have.

The stock currently trades at more than 307 times trailing price-to-earnings (P/E). Even with the powerful growth drivers, I have no idea if the firm can grow into its multiple fast enough. There are just way too many question marks that make Tesla one of the toughest Magnificent Seven companies to keep hanging onto going into the new year.

With a big name over at Morgan Stanley recently downgrading the shares to equal weight (the equivalent of a hold rating) from overweight, I do think investors are right to question the valuation at these heights.

The stock isn’t cheap. But what’s more, the Morgan Stanley analyst also sees EV headwinds as well as uncertainties regarding the robotaxi timeline. I guess to be a bull, you’ve got to have faith in Elon Musk and his ability to execute effectively on a number of fronts. At today’s extended multiples, I’d argue that the timing needs to be right as well.

Otherwise, it might not take all too long for some shareholders to start losing patience and throwing in the towel, especially if another firm ends up further along in the robotaxi rollout over the next couple of years. On the plus side, you don’t have to look far for a big believer in Tesla, even as shares look to break out to new highs.

Analysts over at Piper Sandler are taking the other side of the trade, noting that Tesla’s FSD might be “very close” to achieving the next big step (unsupervised self-driving). Deutsche Bank’s Edison Yu is also upbeat on Tesla despite the hefty multiple, citing the name as one of his “top picks” for the year ahead. Robotaxis are a major reason why.

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