Tesla Inc TSLA‘s narrower-than-expected loss in the fourth quarterand slight revenue beat doesn’t tell the whole story of the quarter as digging beyond the headline numbers shows “some puts, some takes,” according to one of Wall Street’s most notable analysts.

The Analyst

Bernstein’s Toni Sacconaghi maintains a Market Perform rating on Tesla’s stock with an unchanged $265 price target.

The Thesis

Tesla’s top-and-bottom-line report were mostly in-line with expectations, but a negative free cash flow of $277 million was “much better” than expected, Sacconaghi said in a note. Accounting for multiple one-time items, the cash burn in the quarter was likely around $1.2 billion which would be consistent with expectations.

Tesla’s management reiterated its guidance of producing 2,500 Model 3 cars per week by the end of the first quarter and doubling that figure by the end of the second quarter. But on the other hand, the company’s lack of guidance on the current production rate that the Model 3 is experiencing prompted the analyst to lower his first quarter Model 3 deliveries from 28,000 units to 15,000 units.

Investors would have reason to be concerned with the Model 3 car’s profitability and margins, Sacconaghi said. The company said the Model 3 gross margins would come in break-even in the fourth quarter and now expects a negative gross margin in the first quarter despite a higher volume forecast.

Tesla did take several “positive” steps in the quarter to build cash and a future capital raise now “appears less urgent” versus the prior quarter, the analyst said.

“We continue to believe that the Tesla investment thesis hinges on the company’s ability to make the Model 3 profitably and deliver good initial build quality,” Sacconaghi concluded. “Both remain uncertain, and we see risk-reward on the stock as neutral to modestly negative.”

Price Action

Shares of Tesla were trading lower by 0.8 percent early Thursday morning.