Tesla earnings have reinvigorated investors but some growth drivers look 'unsustainable,' JPMorgan says

• Tesla closed 22% higher connected Thursday, its champion time successful years aft posting beardown earnings.
• Analysts astatine JPMorgan be aware that immoderate of nan automaker's maturation drivers aren't sustainable.
• Some of nan factors JPMorgan questioned see beardown income of regulatory credits successful nan quarter.

Tesla's net hit fueled a immense rally for nan banal connected Thursday, but JPMorgan is urging caution.

Analysts astatine nan slope said that while nan strong earnings should boost nan banal successful nan short term, nan automaker's maturation drivers mightiness not beryllium sustainable successful nan coming quarters.

The analysts correctly called nan large guidance successful nan banal connected Thursday post-earnings, pinch shares rising 22%, but they added that they spot immoderate caveats to nan company's outlook.

"However, we astatine nan aforesaid clip spot respective perchance unsustainable drivers of 3Q's amended net and rate travel performance."

The analysts pointed successful peculiar to Tesla's near-record income of regulatory credits. Tesla tin waste credits it receives for producing electrical cars to different companies that don't meet authorities emissions requirements.

It's a hugely profitable business, and nan credits generated $739 cardinal for Tesla successful nan astir caller quarter, nan second-highest magnitude aft nan erstwhile quarter's $890 million. While nan credits are a immense profit driver successful nan adjacent term, JPMorgan analysts said that won't past arsenic different automakers present their ain EVs and bargain less credits from competitors for illustration Tesla.

"Investors should beryllium cautious astir capitalizing nan net generated from these (100% margin) credits, fixed that 1 of nan tenets of nan Tesla bull lawsuit is nan ample standard electrification of nan automotive industry," nan analysts wrote. "As different automakers broaden their electrical offerings, they should complete clip beryllium successful a position to make their ain credits, negating and yet eliminating nan travel of competitor payments to Tesla."

The analysts besides pointed to ample moving superior benefits, which they opportunity are unsustainable.

Tesla saw a ample hit connected free rate travel successful nan astir caller quarter, but that was successful portion owed to a ample summation successful nan magnitude owed to its suppliers and different accrued liabilities, nan analysts say.

Tesla has only ever generated much rate from an summation successful accounts payable successful 1 different quarter, but astatine that time, deliveries and accumulation some grew overmuch faster, nan analysts said. They wrote successful nan statement that this suggests that this driver of nan quarter's beardown rate travel is unsustainable and perchance reversing.

"Automakers are expected to make rate from moving superior arsenic income rise, fixed timing differences arising from nan favorable waste and acquisition position they bask pinch suppliers, but digging much profoundly into nan benefit, we statement only successful 1 4th has Tesla ever generated much rate from an summation successful accounts payable than it did successful 3Q24," nan analysts said.

The automaker reported net per stock of $0.62 for nan 3rd quarter, outpacing analysts' expectations of $0.51. Its operating profit came successful astatine $2.7 billion, exceeding expectations of $2.0 cardinal and marking a 54% summation from a twelvemonth ago. The institution besides announced that its Cybertruck has reached profitability.

JPMorgan rates Tesla "Underweight" pinch a December 2025 value target of $135 a share, 48% little than its Thursday closing value of $260.48.