ARK Invest's Tasha Keeney breaks down Tesla's latest earnings report

Tasha Keeney, ARK Invest Analyst, joined Yahoo Finance Live to discuss Tesla's Q4 earnings report and her outlook for the company.

Video Transcript

ADAM SHAPIRO: Shares of Tesla in the post-market are down about 4%, not as much as when the earnings report first hit. We're going to talk about this earnings report with Tasha Keeney, ARK investment analyst. It's good to have you here. And help us understand-- I get it. They missed on their earnings per share. Adjusted, it was $0.80. The Street was expecting $1.01.

Well, look, they grew EBITDA. They grew revenue. What is the message the investors are saying to Tesla-- not enough, not good enough? I mean, they give Tesla a pass all the time.

TASHA KEENEY: You know, it's funny you say that. In my experience covering Tesla, I can't say that the company-- it doesn't feel as if it's always gotten a pass. I feel like this year what we really see in change is that, well, so first, I should say at ARK, we're focused on the long term. We're focused on disruptive innovation. Tesla is a leader in electric vehicles and autonomous technology. We think they're at least three or four years ahead of the competition.

And so I feel as if the Street has definitely realized that they're a leader in EVs. That's been the big change this year. We've seen a lot of analysts' notes recognizing that. I think this particular quarter that the miss on EPS, well, long-term, the research that we've done on electric vehicles shows that battery costs should decline over time.

We use something called rights law, which says for every cumulative doubling in production, you get a corresponding reduction in price. So we expect those costs to decrease. That should help Tesla's margins over time. So I would say quarter to quarter, we're not too concerned about any specific miss on that line necessarily. We're really looking at that long-term picture.

SEANA SMITH: Tasha, one thing that could be weighing on the markets here-- our colleague Jared Blikre just flagged this here for us-- is the fact that we didn't get any specific guidance when it comes to production targets. I guess what are you looking for? What do you think is needed just in order to meet the Street's expectations on that?

TASHA KEENEY: Yeah, so they did say that they expect to grow at a 50% rate instead of giving a flat out target. But I'd say overall, I mean, if you look at a big picture here, Tesla is the leader by far in market share for battery electric vehicles. We've seen them have great success in China, a market in which it's typically been historically not easy for a foreign company to wholly own a factory, for instance. Tesla is the only company to do that. And their brand power is really great there.

So I'd say longer term, we see them scaling like crazy. They're building up in Berlin and Shanghai and Austin. There's been recent talks of India. I think that what we should be thinking about is whether or not the traditional automakers will be able to catch up to Tesla, because we really do think that electric vehicles are the way forward.

They're already lower on a total cost of ownership basis. And given the cost decline we see in batteries, we expect those sticker prices to come down. And actually I should mention, we just put out some research today, our Big Ideas Report. My colleague, Sam Korus, has done a lot of great work on these battery costs decline. So all of that is in there.

And I think what people are maybe missing in the Tesla story is still this autonomous technology's piece which is what I cover. I think that Tesla released as beta, full self-driving update to vehicles. I'd be excited on the earnings call to see sort of what they have planned next there.

But we think that the opportunity and ride hail could give them a recurring revenue stream with much higher margins than the traditional auto business. So if you're thinking of that margin line, that's something to look out for, for sure.

ADAM SHAPIRO: I know a couple of Tesla owners who just brag and adore these vehicles, one of them my older brother. And I always tell him keep your hands on the wheel because he uses the self-driving feature even though it's not intended the way I think he is using it. Sorry for calling you out, Danny.

But they just dropped the price of the Model 3 in China. How much lower, though, in the US and in, for instance, Europe. Will that price target have to be for them really to-- I'm sure that the traditional automakers are worried but to really start sweating.

TASHA KEENEY: Yeah, so the question is, when do we see this price parity point? And I feel like the price of the cybertrucks sort of already surprised and I think gave us a really great indication that we're getting there. And Tesla at Battery Day this year announced that they're going to produce a $25,000 car. And we know that the changes that they're making to their batteries in terms of this structural battery, basically, that the cell to vehicle versus cell to pack, this is going to make a big difference in terms of cost and range.

So basically, you're going to be able to offer a longer range vehicle for lower prices. So that's supposed to happen over the next few years, that $25,000 car. And I think that's what people are looking for in terms of this mass market vehicle that's much cheaper than a gas-powered car, because gas-powered cars are only getting more expensive with emission standards.

They're not writing that cost decline curve that we see in electric vehicles. And on top of that in terms of performance and range, Tesla's really unbeatable today. So, again, I think they still have a comfortable lead there.

SEANA SMITH: Hey, Tasha, we only have about a minute left here. But my question to you, when it comes to Tesla's stock price, I guess, how much do you think fundamentals matter versus whether or not it's all about growth and some of these lofty goals that we're getting from Elon Musk?

TASHA KEENEY: So I would say with disruptive innovation, you have to look at that long-term picture. And that does affect the fundamentals. Again, those cost declines should enable better margins in the long term.

So I think in terms of goals, we're looking at how quickly they can scale-- what sort of advantages they get from these battery improvements that they're making over the next few years. And then I said autonomous technology I think is really an opportunity that's not well appreciated today.

And, in fact, we've done some work to say that Tesla could even launch a ride-hailing network with human drivers ahead of Robotech's e-launch and still get that recurring revenue line at a great profitability point. So I think that that's something that could happen in the near term even if you don't believe that Tesla is going to create a fully autonomous car.

ADAM SHAPIRO: Tasha Keeney, ARK investment analyst. Thank you for joining us on Yahoo Finance--