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After-hours trading is an odd, mostly American phenomenon. How a stock moves immediately after post-close earnings will tend to set the tone for the next regular trading day (Jiang et al, 2012), even though it’s on thin liquidity where the only active players are high-frequency firms and retail punters (Cui, 2021; Scharnowski, 2024).
One of the companies posting earnings this week was Tesla. In extended-hours trading, its shares very briefly went down, then went up:
To recap, the politically advantaged automaker missed fourth-quarter expectations by a mile.
EBIT was $1.58bn (consensus: $2.7bn). Net margin was 6.2 per cent (consensus: 9.9 per cent). Auto revenue of $18.7bn missed by 11 per cent following a quarter-on-quarter drop in the average selling price.
EPS was in line only after Tesla booked $837mn of “Other income”, nearly all of which was from marking to market its bitcoin wallet. Without the crypto write-up, EPS would have been $0.49 (consensus: $0.77). Logically, nothing here supports the stronger post-close share price. And yet . . .
The usual explanation for when Tesla trading resembles a Pump.fun shitcoin is: “because Elon talks a lot”. Here’s JPMorgan analyst Ryan Brinkman to expand on the theme:
It’s not clear to us why Tesla shares traded as much as +5% higher in the
aftermarket Wednesday, although we have some leading theories. 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 (i.e., more than the $14.8 trillion combined market capitalizations of Apple, Microsoft, NVIDIA, Amazon, & Alphabet). 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”. It may have even related to management guidance for 2026 (no financial targets were provided, but it was said to be “epic”) and for 2027 and 2028 (“ridiculously good”).
Brinkman, who has a long-standing “underweight” rating on Tesla, is beginning to sound a bit exasperated:
[T]he 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. For instance, Tesla has missed Bloomberg consensus EBIT in 9 of the past 10 quarters by an average of -16.3%.
Consistently missing estimates is one thing. What Tesla has been doing is consistently missing lowered estimates, per this chart from Dan’s post earlier in the week:
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On JPMorgan’s numbers, Tesla’s reported Q4 EBIT was 82 per cent below the level expected 10 quarters ago. The stock is up 75 per cent over the same period, and the sellside has been YOLOing through it all:
From October 19, 2022 through January 29, 2025, analysts tracked by Bloomberg have lowered their average EBIT estimates by -70% for 2025 (from $36.8 bn then to $11.2 bn today) and by -67% for 2026 (from $46.5 bn then to $15.4 bn today) but have over the same time raised their 12-month price target for TSLA shares by +18% (from an average $289 then to $342 today).
Several other commentators have spotted this apparent disconnect between Tesla’s fundamentals and the fundamental analysis.
“The sellside analysts taking up their price targets on these numbers are whores,” Gordon Johnson, the Tesla permabear founder of GLJ Research, told us by email on Thursday, adding helpfully: “feel free to quote GLJ on that word for word.”
Brinkman’s perspective is more measured:
For how much longer can [Tesla] stock remain divorced from the fundamentals? It has continued for far longer than we would ever have suspected, but we don’t think it can continue forever; given the considerable run up in the shares as performance and expected future performance have by equal measure deteriorated, we sense a high risk of mean reversion (including by potential catalysts that may be difficult to foresee at present).
All of which brings us back to the extended-hours trading.
As noted above, the immediate share-price reaction to earnings sets the tone. Tesla’s 5 per cent after-hours bounce impelled commentators to back-engineer an explanation. That meant diving into Q4 outlook, skipping near-term guidance for ASP and COGS that was to lower expectations further, and pulling out the (mostly reiterated) stuff about full-self driving, cybercabs and helper robots by 2026.
Awaiting Musk’s headliner performance on the conference call, the positive market reaction to promises of jam next year was a helpful support act.
It seems to work this way every quarter, pretty much:
Tesla’s biggest asset is hyperbole. The more extreme the hyperbole, the more valuable it gets. Maybe after-hours market participants understand the dynamics better than Tesla bears, so are primed to park fundamentals and trade on vibes. Or maybe something else entirely is going on.
Further reading:
— Tesla’s departure from reality, in one chart (FTAV)
— A fork in the road for Tesla (FTAV)
