Stocks often soar after companies announce layoffs, as Wall Street rallies for the prospect of improved efficiency and profits.
But that’s not how investors treated the latest news. tesla. The company’s stock fell about 6% on Monday and fell on Tuesday after CEO Elon Musk told employees the company was cutting more than 10% of its global workforce. The stock fell a further 3.5% to its lowest level since April last year.
“There is nothing we hate more, but it has to be done,” Musk wrote in a memo about the layoffs.
Tesla shares have soared since the turn of the calendar, falling 29% in the first quarter, the worst period since late 2022 and the third-biggest decline since the company’s initial public offering in 2010. The stock is 60% below its all-time high in November. 2021.
There was no such pessimism in the market with previous layoffs. When Tesla cut its workforce by 9% in 2018, its stock price rose more than 3%. Shares fell 9% in 2022 following initial reports of layoffs, but recovered after Musk issued clear comments days later.
Tesla is in a different predicament today.
Earlier this month, the company reported a decline in vehicle deliveries in the first quarter, the first annual decline since 2020, when production was disrupted by the coronavirus pandemic. In China, Tesla faces stiff competition from domestic EV makers such as BYD and mobile phone maker Xiaomi.
Prior to the layoffs, Tesla had lowered prices and offered incentives to other buyers, which could have led to lower profit margins. Last week, the company announced it was cutting the subscription price of its premium driver assistance system, sold as Fully Self-Driving (FSD), in half for U.S. customers. FSD does not make the vehicle self-driving and requires an attentive driver at all times.
Tesla Model Y, equipped with FSD system. His three front cameras are located under the windshield near the rearview mirror.
Mark Leon | Washington Post | Getty Images
by Latest data available According to Kelley Blue Book, overall EV prices in March were down 9.7% compared to the same month last year due to a “strong incentive package.” Tesla’s price bottomed out in January, but prices rose slightly in March.
Job cuts weren’t the only reason Tesla’s stock fell Monday, as Tesla executives Drew Baglino and Rohan Patel announced they were leaving the company. Mr. Baglino has worked at Tesla since its early days, starting in 2006 as a firmware and electrical engineer. Patel joined Tesla in 2016 after working as a senior adviser to former President Barack Obama on issues including climate.
“It is critical that we look at all aspects of the company to reduce costs and increase productivity,” Musk said in his layoff memo. However, analysts and investors see demand as problematic.
According to FactSet, 18 analysts lowered their price targets for Tesla stock this month, but none became more bullish.
Doug Clinton, managing partner at Deepwater Asset Management, said on CNBC’s “Squawk Box”: “Just when you thought it couldn’t get any more bad news for Tesla, questions about EV demand have surfaced in recent quarters. I’m doing it,” he said. Monday. “We are now questioning whether we intend to produce a lower-priced Model 2 of FSD and whether we are lowering the price.”
Earlier this year, Tesla began acknowledging that its growth rate in 2024 could be “significantly lower” than in the previous year. The company says it is between two waves of EV growth, but has refrained from releasing guidance for 2024.
On top of the increased competition and dynamics of the EV industry, there’s also the unpredictability that comes with Musk.
The billionaire faces intense scrutiny from multiple regulators over his dealings at X (formerly Twitter), and shareholders have expressed concerns about whether he is paying enough attention to Tesla. . Musk is CEO of SpaceX, owns X, founded artificial intelligence venture xAI, and runs brain-computer interface company Neuralink and tunnel venture The Boring Company.
Meanwhile, he has repeatedly disparaged illegal immigrants, railed against corporate diversity efforts and reposted false conspiracy theories.
Mr. Musk is said before He said he has never missed any “important” meetings at Tesla and has not been “completely absent from work.”
Tesla did not respond to CNBC’s request for comment.