Dougherty Is Buying Tesla, Emphasizes 'Cash Is King' And 'Show Me' Sentiment For 2016

Following Tesla Motors Inc TSLA's earnings release, the electric automaker is up over 6 percent in mid-morning trading, hitting a weekly high at $163.055 around 10:00 a.m. EST.

Within the conference call, Tesla reiterated its stance that "cash is king," singing a positive tune for 2016. Dougherty & Company LLC analyst Andrea James released a flash note following the release, highlighting key takeaways from the call and adding its own two cents to the company update.

Dougherty: Buy Rated, $355 Target Price

Honing into cost control, Dougherty elaborated upon CEO Elon Musk's opening remarks in the conference call, "The biggest focus of the conference call was Tesla's commitment to being net cash flow positive in 2016. Tesla has flexibility on its asset based line of credit to maintain a billion dollar minimum cash level to fund working capital."

Related Link: Deutsche Bank Thinks Demand For Tesla's Products Could "Dwarf Expectations," Maintains $280 Price Target

Within Q4, Tesla generated $197 multi-million from operations, a substantial improvement over "burning" $40 million in Q3, $41 million in Q2 and a whopping $54 million in Q1.

James was quick to point back to Dougherty's previous note and emphasize the cautious outlook Tesla demonstrated in its capital expectations against a "skeptical" Street. "[T]hough Tesla has repeatedly said that it does not intent to raise capital in 2016, most of Wall Street is skeptical," James elaborated, "Thus, 2016 is a ‘show me' year on the cash flow front. Tesla guided to $1.5 billion in CapEx in 2016 with the bulk going to Gigafactory, Model 3 development, and geographic expansion of the sales services, and supercharging network."

Based upon the above, Dougherty reiterated its Buy rating and $355 price target on Tesla.

Other News From The Release

James also spent time addressing company updates in the research note, including:

• Alleviating "Lingering concerns" regarding Model 3 demand
• Reaffirming the fiscal year 2016 unit outlook (Tesla guided 80,000-90,000)
• Anticipated non-GAAP profitability for the year, "moderate" GAAP profitability for Q4
• Unveiling of Model 3 scheduled for March 31 with production/delivery expected late 2017
• Quarterly performance included a loss per share of $0.87, revenue of $1.75 billion (both negative against the Street's estimates)

James concluded, "Given that Tesla is heavily shorted and the stock has had a major recent sell-off on overblown fears about 2016, we expect shares to lift on the quarterly report. Beyond that, Tesla's update was largely in line with our detailed preview note."