Why Is Tesla's Stock Rallying Despite Earnings Miss? JPMorgan Analyst Puzzled

Tesla Inc. TSLA, owned by Elon Musk, experienced an 8% surge in its stock following an earnings miss, leaving JPMorgan analysts scratching their heads.

What Happened: JPMorgan analyst Ryan Brinkman was left perplexed by Tesla’s stock performance. Despite a 38% shortfall in earnings before interest and taxes and the lowest profit margin in years, Tesla’s shares soared.

According to the report by Market Insider, Brinkman offered several theories for the stock’s rise, including CEO Elon Musk’s ambitious projections during the earnings call. However, he remained skeptical, maintaining his $135 price target for Tesla, indicating a potential 68% downside from current levels.

“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,” Brinkman told the outlet.

On Wednesday, Tesla reported its first annual sales decline since 2008, with fourth-quarter revenue of $25.7 billion, missing estimates by $1.4 billion, and earnings per share of $0.73, missing estimates by $0.02.

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Brinkman also expressed concern over Tesla’s guidance for a return to growth in 2025, noting that the company’s financial performance and analyst price targets seem to be moving in opposite directions.

“Tesla shares continue to strike us as having become completely divorced from the fundamentals,” Brinkman concluded.

Why It Matters: The unexpected rally in Tesla’s stock despite the earnings miss raises questions about the factors driving investor sentiment. While Brinkman’s analysis points to a disconnect between the company’s financial performance and its stock price, the market seems to be responding to other factors, possibly including CEO Elon Musk’s ambitious growth projections.

As Tesla navigates the challenges of missed earnings and a declining sales trend, the market’s response will continue to be closely watched.

The divergence between analyst price targets and actual stock performance underscores the complexities of the current investment landscape.

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