What happened

Shares of electric-car maker Tesla (NASDAQ:TSLA) fell on Thursday, declining as much as 5.1%. As of 11:14 a.m. EST, however, the stock was down 3.8%.

The stock's decline came as Morgan Stanley analyst Adam Jonas issued an underweight rating for the stock. This, which is the equivalent of a sell rating, follows a huge run-up in the stock price. Jonas believes shares are now overvalued.

A chalkboard sketch of a chart showing a stock price falling

Image source: Getty Images.

So what

In a note to investors on Thursday, Jonas increased his 12-month price target on the stock from $250 to $360 but downgraded his rating on the stock from hold to sell.

The analyst noted that though he has been "encouraged by Tesla's execution" recently, he believes "investors will be presented with more attractive opportunities to own the stock in the future."

Shares have skyrocketed in recent months. Even after the stock's decline on Thursday, shares are up 93% in the past three months.

Now what

It's true that Tesla's valuation has become far pricier recently. Tesla's price-to-free-cash-flow ratio has risen from around 50 three months ago to over 100. Its price-to-sales ratio has risen from about 1.8 to 3.6.

Tesla's higher valuation multiples mean there's greater pressure for the electric-car maker to maintain its rapid growth in the coming years.