Tesla's layoffs mean the company's lead on electric vehicles could be ending, one Wall Street analyst says (TSLA)
- Tesla is laying off about 3,000 workers, the company announced Friday morning.
- Shares dropped as much as 7% following the news as investors questioned what the restructuring meant for the stock.
- Morgan Stanley said the move could be a sign Tesla's US market-share lead could be peaking, while an analyst at Wedbush said investors had "more questions than answers."
News on Friday that Tesla planned to lay off about 3,000 workers seemed to heighten investor worries that demand could be shrinking for the company's Model 3 sedan.
In an email to employees, CEO Elon Musk said the layoffs were part of an initiative to bring down the cost of producing the sedan, which has been complicated by the halving of a US federal tax credit previously available to buyers.
Adam Jonas, an analyst at Morgan Stanley, says factors like that — including Musk's announcement that Tesla’s customer-referral program would end February 1 — could be a sign the company is nearing a peak.
"During 2019, we expect to see Tesla's share of the US EV market continue to rise before the competition gradually starts chipping away," he said in a note to clients Friday morning. "Tesla's gap-to-competition in terms of market share maybe approaching a peak."
Indeed, as Tesla races to produce its long-awaited base-model Model 3, an increasing number of electric vehicles are set to hit the market soon. In Detroit last week, Cadillac revealed a new electric concept vehicle, the Chinese automaker Geely announced a new electric model intended for sale in the US, and Nissan unveiled an electric concept featuring all-wheel drive and full autonomous capability.
Even Ford announced an all-electric F-series truck. Meanwhile, Nissan Leaf sales grew 95% last year.
To be sure, Tesla accounted for 80% of electric-vehicle sales in the US last year, according to data from Inside EVs — and that market is still quickly growing. So until Tesla reports its fourth-quarter results, investors will have more questions than answers.
That's what's behind the stock's 7% drop Friday morning, according to another analyst.
"The knee jerk reaction to this morning's blog post will clearly be negative from the Street's perspective as there will be more questions than answers until the company formally reports earnings/guidance in early February," said Dan Ives, an analyst at Wedbush. He's much more bullish on the company than Jonas, with a $440 price target compared with Morgan Stanley's $291.
"While headwinds are abound on a number of different fronts," Ives continued, "we continue to believe Tesla will be able to emerge from the next 12 to 18 months a stronger, profitable more product diversified (geographically and price points) EV company helping lay the groundwork for Model 3 as a linchpin of growth going forward into 2020 and beyond."