This is why Morgan Stanley just reduced its exposure to 'poor performing' Tesla shares

Morgan Stanley investment strategists led by Denny Galindo made a series of changes to the bank’s U.S. All Cap Growth Model Portfolio.

While the bank added a position in Block (NYSE: SQ) and increased its exposure to Alphabet (NASDAQ: GOOGL), it also slashed its position in electric vehicle (EV) maker Tesla (NASDAQ: TSLA).

Morgan Stanley explained the move “as higher rates and competition weigh on car prices and operating margins” of Tesla.

Last month, Tesla said its total operating margin stood at 7.6% in Q3, down significantly from the year-ago quarter’s figure of 17.2%.

Since Morgan Stanley investment strategists added TSLA stock to this portfolio in early 2021, the stock fell about 9%. As a result, the bank is reducing exposure “after poor performance in
the Model.”

“Given TSLA’s volatile nature, we would rather add exposure to other volatile names with fewer nearterm headwinds,” Galindo wrote.

Tesla shares are up 78% year-to-date.

By Senad Karaahmetovic

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