Tesla’s Stock Defies Fundamentals

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On Friday, JPMorgan analyst Ryan Brinkman said, “Tesla shares continue to strike us as having become completely divorced from the fundamentals.”

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It’s safe to say that JPMorgan is deeply skeptical of Wall Street’s upbeat reaction (up 8% post-earnings at the time of my writing) to Tesla’s earnings after a whopping 53% decline in its 2024 net income compared to the prior year.

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This fits into a broader pattern for Tesla’s shares – the company’s financial performance continues to falter, yet analysts’ price targets and the share price keep rising.

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For example, Tesla’s Q4 2024 EBIT of $1.58 billion was 38% below the $2.50 billion expected by Wall Street 10 quarters ago.

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So why is the share price rising? Investors are buying the dream Elon Musk is selling – one where Tesla’s AI, autonomous vehicle, and robotics ventures transform it into the “most valuable company in the world by far.”

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With the Tesla bull and bear arguments diverging further apart, something will eventually have to give.