Tesla is a 'cash machine' after Q4 earnings, but its next steps are raising eyebrows, analysts say

Published Thu, Jan 27 20226:42 AM ESTUpdated Thu, Jan 27 202212:20 PM EST

Jesse Pound @/in/jesse-pound @jesserpound

Tesla proved once again that it can be a successful car company while growing at a rapid pace, but the next innovations at the company aren't being met with open arms on Wall Street. The automaker beat estimates on the top and bottom lines for the fourth quarter , with the company after the closing bell Wednesday reporting revenue growth of 65% and a gross margin of more than 27%. The transformation of Tesla into a profitable company while still seeing major growth has proven some of its Wall Street supporters correct. Morgan Stanley analyst Adam Jonas, who has an overweight rating on the stock, said in a note that Tesla is an "EV 'cash machine.'" "The company is annualizing to > 1% [free cash flow] yield. Sure it's lower than the legacy auto companies that seem to be in fashion lately," Jonas said in a note to clients. "But how many 50% multi-year top line growers on your screen actually generate cash?" However, some of the forward-looking commentary from the earnings report and the call with CEO Elon Musk and other executives left other analysts more cautious. The company warned that the ramp-up of new factories, along with supply chain issues, could hurt margins in the near-term, and the company also said it would not roll out any new models this year. "This is still our favorite idea — and today's results did nothing to dent our enthusiasm — but the quarter wasn't completely flawless. Supply chain headwinds are inflating logistics costs while forcing a measured approach to new product introductions," wrote Piper Sandler analyst Alexander Potter, who has an overweight rating on the stock. Analyst Toni Sacconaghi, who has an underperform rating, said that struggles with the Cybertruck and the lack of development of a cheaper model could hurt the company's long-term prospects. "Tesla's goal of 50% unit growth translates to 3.1M+ units in 2024, which seems highly ambitious if the company will only be selling 2 high volume vehicles (Model Y and Model 3) and Cybertruck (250K units). Musk suggested that robo-taxi availability could create enormous demand elasticity, but we struggle with the timeframe and magnitude," Sacconaghi said. Musk's bullishness on the company's self-driving feature and humanoid robot project Optimus were also met with skepticism by some analysts. Tesla did receive several price target hikes, though most of the new targets are still below the stock's current price. Shares of Tesla were down about 1.2% in premarket trading on Tuesday but were off of their initial lows from Wednesday evening.

SpaceX founder and Tesla CEO Elon Musk holds a helmet as he visits the construction site of Tesla's gigafactory in Gruenheide, near Berlin, Germany, May 17, 2021.

Michele Tantussi | Reuters

Tesla proved once again that it can be a successful car company while growing at a rapid pace, but the next innovations at the company aren't being met with open arms on Wall Street.