Tesla, Inc. (NASDAQ: TSLA) shares fell in early trading on Monday after Morgan Stanley’s auto analyst Adam Jonas downgraded the electric car marker, citing that competition from Silicon Valley tech companies is increasing.
Jonas cut his rating on Tesla to equal weight from overweight. However, he reaffirmed his target price of $305, representing 6 percent downside from Friday’s close.
Jonas argues that Tesla is facing massive competition from tech companies like Alphabet, Apple and others in the auto industry. He cited that many of the companies are already testing their autonomous vehicles on public roads.
"The bull case on Tesla is that it can become the next Amazon or Apple. We see such firms as competitors ultimately. We question whether the risks of going head-to-head vs. the tech giants is sufficiently discounted in the price," Jonas wrote in a note to clients. "We expect much larger and more well-capitalized competitors to unveil strategies that directly address sustainable transport and mobility."
Tesla shares fell 2.3 percent in early trading. The stock, which has gained 48 percent this year, is one of the best performing stocks in the market. Investors are bullish on Tesla as the company will deliver their $35,000 Model 3 this year. Tesla expects to produce 5,000 Model 3s per week by the end of 2017. But some analysts still have concerns whether the company will meet its plan.