Jpmorgan Is Deeply Skeptical Of Wall Street's Upbeat Reaction To Tesla's Earnings Miss

Tesla CEO Elon Musk.

Grzegorz Wajda/SOPA/Getty Images

• Tesla stock is up 8% since its earnings report on Wednesday despite missing profit and revenue estimates.
• JPMorgan criticized Tesla's valuation, citing a pattern of missed earnings projections.
• Elon Musk's bold prediction may have influenced the stock's rise, despite financial concerns, JPMorgan said.

JPMorgan thinks Tesla's post-earnings stock rally of 8% despite missing analysts' profit and revenue estimates is a headscratcher.

The bank, which has long been bearish on Tesla stock, said in a note on Thursday that a 38% miss in earnings before interest and taxes and the lowest profit margin in years is yet another sign that the company is overvalued.

"The move higher in Tesla shares bore no relation whatsoever to the company's financial performance in the quarter just completed or to its outlook for growth in the coming year," JPMorgan analyst Ryan Brinkman said.

Brinkman offered several theories about what drove the stock higher since its earnings report, including the sky-high projections Tesla CEO Elon Musk made during the earnings call.

"Perhaps it was management's statement that it had identified an achievable path to becoming worth more than the world's five most valuable companies taken together," Brink man said.

"Or maybe it was management's belief that just one of its products has by itself the potential to generate 'north of $10 trillion in revenue,'" he added, referring to a prediction on the call made about Tesla's Optimus humanoid robot.

But Brinkman isn't buying what Elon Musk is selling, sticking with his $135 price target, which represents potential downside of 68% from current levels.

The actual results showed that Tesla reported its first annual revenue decline since selling its first car in 2008. The company reported fourth-quarter revenue of $25.71 billion, missing estimates by $1.4 billion, and earnings per share of $0.73, missing estimates by $0.02.

However, the guidance for a return to growth in 2025 may have been the most concerning aspect to Brinkman.

The outlook provided by Tesla during its third-quarter earnings call was for vehicle deliveries to grow 20%-30% in 2025 was moderated to only "a return to growth," Brinkman highlighted.

"This fits into a broader pattern for Tesla shares — the company's financial performance and Bloomberg consensus for revenue, margin, earnings, and cash flow all keep coming down, but analyst price targets and the company's share price keep going up," Brinkman said.

For example, Tesla's fourth-quarter earnings before interest and taxes of $1.58 billion was 38% below the $2.5 billion expected by Wall Street, but 10 quarters ago, analyst consensus for 4Q24 EBIT stood at nearly $9 billion, representing an 82% miss from that prior estimate.

"This brings us to the crux of the issue," Brinkman said. "Tesla shares continue to strike us as having become completely divorced from the fundamentals."

For now, investors don't seem to care as Musk gets closer to the White House and continues to be the richest person in the world by a wide margin.

Shares of Tesla are up 4% year-to-date and are up 119% over the past year.