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The most widely followed Tesla bull on Wall Street just changed his mind

CNBC logo CNBC 15/05/2017 Tae Kim

Morgan Stanley's Adam Jonas, who was one of the most bullish Tesla (TSLA) analysts, cut his rating on the electric car marker to equal-weight from overweight, citing increasing competition from larger technology companies. 

Jonas is known for having some of the most aggressively bullish predictions on Tesla's future ambitions including a note highlighting an Uber-like transport service with autonomous electric vehicles published last year. Tesla shares fell more than 2 percent in the premarket after Monday's note made the rounds on Wall Street.

"The bull case on Tesla is that it can become the next Amazon (AMZN) or Apple (AAPL). 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," analyst Adam Jonas wrote in a note to clients Monday. "We expect much larger and more well capitalized competitors to unveil strategies that directly address sustainable transport and mobility."

Tesla is one of the best performing stocks in the market this year. The company's shares are up 52 percent year-to-date compared to the S&P 500's 7 percent return.

The analyst reaffirmed his $305 price target for Tesla, representing 6 percent downside from Friday's close.

© Provided by CNBC Jonas cited recent developments such as Waymo, an Alphabet (GOOGL)-affiliated autonomous technology driving firm, expanding its fleet by 6 times and Apple securing a permit in California for autonomous driving as further evidence large tech companies are encroaching into Tesla's space.

The analyst also pointed to these other key risks for Tesla:

  • "Tesla may never make the leap to a shared mobility model, limiting itself to a niche OEM status."
  • "Execution risk on unprecedented innovations brought to market on its models and capital intensive initiatives."
  • "Volatility in commodity prices such as oil materially changes the economic benefits of electric vehicles."
  • "Openness of capital markets to continue funding Tesla's strategic and investment ambitions."

In another report Monday, Goldman Sachs analyst David Tamberrino reiterated his sell rating and $190 price target for Tesla due to "potential Model S cannibalization" from the company's upcoming Model 3 car.

— CNBC's Michael Bloom contributed to this story.

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