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Tesla earnings: Analyst explains 3 things that were ‘a bit cautious’ in the report

Wells Fargo Sr. Analyst Colin Langan joins Yahoo Finance Live to discuss fourth quarter earnings for Tesla, supply chain issues, EV market caps, and the 2022 outlook for the demand of Tesla vehicles.

Video transcript

BRIAN SOZZI: There is lots to unpack in the latest earnings report from Tesla. For one, is Tesla now a robot maker? And will the company ever bring its cybertruck to market? Wells Fargo autos analyst Colin Langan may have the answers to those pressing questions for us.

Colin, always nice to see you. Stock down in the early going here. Is the market not liking this robot pivot? Do they not like 50% growth this year? How do you see it?

COLIN YANGAN: Yeah, I mean, I don't know that people are focused too much on the Tesla Bot or Optimus, or whatever he's calling it. I mean, I think there's sort of three things that are a bit cautious. One, if you look at the press release, they talked about potential capacity constraints, I think alluding to the semi supply issue.

I think two, it was supposed to be an update on product. And they definitely said that they are focused on ramping capacity, which means no products this year, including the $25,000 car, which doesn't seem to actually currently be in a plan, which was, they mentioned in their battery day.

And then lastly, I think the push toward full self-driving. We've heard this story before at their autonomy day in 2019. They talked about by year end 2019, we were supposed to have level 4 driving. Elon's pushing that pretty aggressively again, that being a big driver of demand for vehicles, is the rollout of that full self-driving, which is level 4, which would be like a robo taxi, pretty amazing if he's able to accomplish that. I think there's a lot of skepticism that that can be done. It's a pretty huge hurdle, as you could imagine.

JULIE HYMAN: So let's talk about the core business then, Colin, and leave the other stuff aside for just a moment. I mean, this is only one of the many ways that Tesla is different from other automakers is in terms of its model rollouts and in terms of how frequently it comes out with them and how many, or how few, in the case of Tesla, it has. Does it need to come out with new models? I mean, the way that it's communicating, the demand for the existing models is such that they expect, what did he say, 50% growth in deliveries this year, even without them.

COLIN YANGAN: I think that's the ultimate question. I'm a bit cautious, once they get Austin and Berlin off the ground, they'll have about two million units of capacity, you know, based on my estimates. I think they're pretty reasonable assumptions in there. That is going to be-- and realize, that's going to be the Model S and Model Y are going to be predominantly what's driving that utilization. That's going to put them up there with the best selling mass market vehicles. So if you go back in 2019, the same year Toyota RAV4 and the Toyota Camry sold about 2.2 million combined. So that's the kind of levels you need. Realize the RAV4 is about a $28,000 vehicle at base and the Model Y is about a $58,000, $59,000 vehicle base price, so twice the price and supposed to do the same volume. That's a very, very high hurdle. It'll really be tested in the second half of this year, once the capacity is online.

BRIAN SOZZI: Colin, this week we talked to Ford CEO Jim Farley. And he told us, one, they already have 10,000 orders for their E-Transit electric vans. Two, he told us they have 200,000 reservations for their first ever pickup truck, the electric pickup truck, the Lightning. These are real orders. And perhaps some of them, if Ford wasn't a big player here, perhaps some of those orders would have went to Tesla, in some capacity. Is this the year that the Tesla bulls need to wake up and realize that these competitors are coming and that might impact the company's growth rates the next few years?

COLIN YANGAN: I mean, it's definitely a concern. And this year is going to be a pretty interesting year, particularly once the capacity is online. I mean, if they could really deliver two million and set new records for sedan and SUV sales with just two models, that's going to be pretty impressive. They already actually set the record on luxury. So you know, they're one step away there.

I think, you know, you have to watch out for some pitfalls if you're going to short the stock here. I mean, realize you have the Build Back Better Act still could sort of reignite, and Tesla would by far probably be one of the biggest beneficiaries there. Realize you're going to have also positive announcements coming when Austin and Berlin come online.

So you know, I think there's still, I'm a bit cautious about where margins might go as those plants ramp and raw material costs on the battery side are really going through the roof, and that's going to start impacting their margin. I do have my own concerns that once they get the capacity that the demand will be there at these very, very high levels. And I'm a bit concerned about the big push on full self-driving if the technology is not fully ready yet. But there are also positive catalysts. That's why I'm equal-weight currently.

JULIE HYMAN: And you've been kind of talking around this. And I want to, if I can, try to pin you down, Colin. Apologies. Can they meet that forecast for this year? Do you think they will be able to do it?

COLIN YANGAN: I do not think. Actually, I'm a bit shy of their forecast of 50% growth. I think it's going to be tough by the second half of the year. And it honestly may not even be tested. There might not be enough semi supply for them to deliver 50% growth. I mean, that's one of the sort of cautionary comments in the press release. And then I really do have my skepticism that they could actually sell. So in my model, I don't have them hitting. And again, I have them hitting record levels and being one of the best selling luxury SUVs and sedans. I just don't know if they could break the mass market milestone.

BRIAN SOZZI: Colin, 10 seconds left. Does Tesla create an army of robots over the next decade?

[LAUGHTER]

COLIN YANGAN: I would say no. But time will tell. He's proven the market wrong before.

BRIAN SOZZI: All right. Well, we figured we'd ask while we have you here. Colin Langan, always good to see you. We'll check back with you soon.

COLIN YANGAN: Thank you.