Why Tesla shares rise even as profit outlook sinks

Wall Street is giving off mixed signals about Tesla Inc.

- BY JORDAN FITZGERALD

AMONG investors, the amount of hope baked into Tesla's share price has become a point of controversy.

(DAVID PAUL MORRIS Bloomberg)

Analysts are increasingly skeptical of the electric-vehicle maker's earnings potential this year, but their expectations for the company's stock price keep climbing.“Tesla is truly unique in capital markets," said Nicholas Colas, co-founder of DataTrek Research. “It is much more like a VC-funded startup than public equity. As long as the vision is bold enough, the valuation levers off that rather than earnings and cash flows.”

Over the last 12 months, the average forecast for Tesla’s 2026 net income has tumbled 56% from $14.1 billion to $6.1 billion as of Monday’s close. Yet, during the same period, analysts have raised their average 12-month price target for Tesla shares to $409.49 from $337.99. The stock was trading around $433 as of 9:46 a.m. Tuesday, which is well above Wall Street’s expectations for a year from now.

The dynamic is “very unusual,” Colas said, since higher price targets typically go hand in hand with improving earnings estimates, not dimming expectations. The company reports its fourth-quarter and full-year results Wednesday. A Tesla representative didn’t respond to a request for comment.