Tesla (TSLA -1.11%) stock lost ground Thursday following the publication of the company's fourth-quarter earnings results. The electric vehicle (EV) company's share price closed out the daily session down 12.1%, according to data from S&P Global Market Intelligence.
Tesla's Q4 report arrived with some concerning results for shareholders. The company posted non-GAAP (adjusted) earnings of $0.71 per share on revenue of $25.17 billion in the fourth quarter. The average analyst estimate had called for the company to report adjusted per-share earnings of $0.74 on sales of roughly $25.76 billion.
Tesla's growth is slowing
While Tesla's revenue grew approximately 3.5% year over year in the fourth quarter, this growth came in significantly below the market's expectations. Performance in the period signals a significant shift in the EV market. While free cash flow (FCF) grew roughly 45% year over year to reach approximately $2.06 billion in the period, future FCF growth won't be so strong unless the company can re-energize its sales momentum.
The business had posted roughly 9% year-over-year sales growth in Q3 last year, which was already somewhat disappointing. The EV specialist's fourth-quarter results reflect broader headwinds facing the electric vehicle industry. Demand for EVs appears to be weakening, but that doesn't necessarily mean that investors should give up on Tesla. The company has recently implemented substantial price cuts in order to boost vehicle sales, and its pricing power could put pressure on its rivals.
What comes next for Tesla?
Over the long term, Tesla could still deliver strong performance. The company is a clear leader in the EV space, and it has multiple ways to win in the category.
Even with recent headwinds dampening its performance, the business continues to post margins that are far above most other players in the automotive industry. Tesla is also an early leader in the robotaxi space, and success in the category could power strong sales and earnings growth.
The company's fourth-quarter results reflect industrywide headwinds. Investors should approach the stock with the understanding that performance could be pressured in the near term, but there's still plenty of long-term growth potential here.
