JP Morgan recommends investors not weight Tesla shares in their portfolio in equal proportion to the S&P because Tesla shares are "by virtually every conventional metric not only overvalued, but ramatically so."

JP Morgan raised their price target on Tesla from $80 to $90 in a report released on Wednesday, but that's still 86% below Tesla's Tuesday closing price of $649.88.

JP Morgan maintained its Underweight rating on Tesla and recommended investors not weight Tesla shares in their portfolio in equal proportion to the S&P because Tesla shares are "by virtually every conventional metric not only overvalued, but ramatically so."

Tesla will be added to the S&P 500 Index in one shot on December 21, a move that will ripple through the entire market as money managers adjust their portfolios to make room for shares of the company.

Tesla's market value has ballooned to about $616 billion, making it the sixth largest company in the US stock market and it would have more than a 1% weighting in the S&P 500.

In the latest report, JP Morgan analysts led by Ryan Brinkman Before said taking a position in Tesla shares equal to its new weight in the S&P, investors should consider an important face:

In the two years since December 8, 2018 during which TSLA shares have risen 808% and during which analysts have on average increased their 12 month price targets by 451%, analysts have simultaneously lowered their estimates for Tesla EPS for 2020, 2021, 2022, 2023, and 2024.

As difficult as this is to conceive ― that the shares would be worth 808% more despite lower than previously expected earnings ― this is what the Bloomberg data shows and it is strongly suggestive of the idea that something apart from the fundamentals (speculative fervor?) is driving the shares higher.

JP Morgan says the biggest challenge they encounter with trying to find support for the current valuation of Tesla shares via any assessment of the fundamentals, at least within the automotive total addressable market, over the long-term beyond 2024 is that the required unit volume and /or margin figures needed within the automotive TAM seem to stretch credulity.

"Our Underweight rating considers notable investment positives, including a highly differentiated business model, appealing product portfolio, and leading-edge technology, which we believe are more than offset by above-average execution risk and valuation that seems to be pricing in a lot," the bank said.

Goldman Sachs, however, seems to take a different view.

The bank last week raised its rating on Tesla to buy from neutral and raised its 12-month price target sharply to $780 from $455.

Goldman Sachs said Tesla's battery development is faster than expected, the car's range is improving, people are increasingly bullish on the electric car industry and believe that Tesla will remain dominant even as the industry expands.

The bank also said that Tesla's mix of models will help it maintain its leading position in the electric vehicle market.

In addition, Tesla's margins are expanding, driven by the Model Y, and the company's growing software sales portfolio will also help its margins over time, Goldman Sachs said.