Source: Barron's
Author: Al Root
After investors digested news of large-scale layoffs, the departure of a key executive, and potential production issues,$Tesla (TSLA.US)$The stock price fell 5.59% to $161.48 on April 15.$S&P 500 Index (.SPX.US)$und$Nasdaq Composite Index (.IXIC.US)$It fell 1.2% and 1.8%, respectively, on the same day. This is the first time since May 2023 that Tesla shares have closed below $162.
Although layoffs are a bigger problem, compared to how many people will lose their jobs, the fall in stock prices also largely depends on who is leaving their jobs.
According to the latest news sent by the company's CEO Elon Musk, the electric vehicle company is planning to lay off more than 10% of its global workforce. “There's nothing I hate more than layoffs, but we have to do it,” Musk said, “but it will make us lean, hungry, and creative in the next phase of growth.”
Tesla did not respond to Barron's request for comment.
In addition to the layoffs, Drew Baglino (Drew Baglino), Tesla's head of power systems and energy engineering, will also resign. He has been working at Tesla for 18 years and is one of the few executives investors can hear about at Tesla investor events. Investors want to see him play a bigger role in the company rather than leave altogether.
Wedbush analyst Dan Ives (Dan Ives) said this was “just like Travis Kells leaving the Chiefs,” and “it's not a good sign, and it's adding to the dark clouds over Tesla's head. Drew is a key figure in the Model 2 model's vision system. Model 2 is a low-cost Tesla electric car scheduled to hit the road by the end of 2025.
Chief Financial Officer Zachary Kirkhorn (Zachary Kirkhorn) left his job in August before Baglino left his job. Other than Musk, Kirkhorn and Baglino are the only two executives included in Tesla's 2023 proxy compensation summary table, which provides details of executive compensation.
“Someone must take responsibility for Tesla's deteriorating sales growth and profit margins,” said Gary Black (Gary Black), co-founder of Future Active Fund (Future Active Fund), which holds Tesla shares. “But it won't be Elon”.
Tesla will also lose at least one of its executives. Business development executive Rohan Patel (Rohan Patel) said in an article on X that he is also about to leave.
Ives wrote on April 15: “Wall Street wants and needs answers to next week's Tesla first quarter call, which will be held on April 23,” “We need to hear from Musk the reasons for cost cuts, future strategy, product roadmap, and overall vision. Otherwise, many investors may choose to vote with their feet during the perfect five-level storm in which Tesla sees weak global demand in 2024.”
Weak demand, combined with other negative news, put Tesla's valuation at risk. Although Tesla's current price-earnings ratio is 44 times, the price-earnings ratio of the S&P 500 index is only close to 19 times. The problem is that Tesla's earnings are expected to grow at an average rate of about 9% between 2023 and 2025, which is in line with the historical average of the S&P 500 index.
Tesla's growth has always been an issue in 2024. The company delivered around 387,000 cars in the first quarter, down nearly 9% year over year, and about 20,000 fewer than Wall Street's lowest figure. The disappointing results came weeks after the company cut production at its Shanghai plant in March.
Globally, sales of all electric electric vehicles increased by about 10% year-on-year in the first quarter of this year, compared with a growth rate of about 35% in the fourth quarter of last year.
By the end of 2023, Tesla had more than 140,000 employees and shipped about 1.8 million vehicles. This means that by the end of 2023, Tesla had shipped an average of about 13 cars per employee. Meanwhile, GM shipped 38 cars per employee.$Ford Motor (F.US)$25 vehicles were shipped.
At first glance, Tesla is much less efficient than the other two car companies, but this comparison has some important caveats: Tesla has its own dealers and some battery products. It also has a fixed electricity storage business and operates the nation's largest fast charging network. In addition, GM's data also includes sales of Chinese joint ventures.
Another comparison with BMW seemed more favorable to Tesla. In 2023, BMW employed about 155,000 workers and shipped nearly 2.6 million cars, with an average of 16 cars per worker.
Despite this, weak growth still means less demand for employees, and slowing growth also means that companies tend to pay more attention to efficiency.
Earlier, there were reports that Tesla suspended production of electric pickups in order to correct some manufacturing problems. Tesla did not respond to journalists' requests for comment on the suspension.
According to delivery data, the recent production of electric pickups is a few hundred units per week. Tesla wants to increase this rate to 5,000 vehicles per week, but Musk recently said that this rate will not be reached until 2025.
Recent corporate and industry issues have put pressure on stock prices. Following Monday's trading, Tesla's stock price has dropped 35% this year.
Editor/jayden