Tesla, the electric vehicle giant led by Elon Musk, faces a critical moment as it heads into its first-quarter earnings call next Tuesday. After a tumultuous few months marked by disappointing delivery figures and significant layoffs, investors are eager for clarity and reassurance. According to Dan Ives, an analyst at Wedbush, the company needs to address these issues head-on to restore confidence among shareholders.
This past Monday, Tesla announced a 10% reduction in its global workforce, a move that followed a 20% drop in deliveries from the previous year. The layoffs included high-profile executives like Drew Baglino, the senior vice president of powertrain and electrical engineering, and Rohan Patel, the vice president of public policy and business development. The departure of Baglino, known for his pivotal role in developing Tesla’s anticipated Model 2, was described by Ives as an “absolute gut punch” to the company.
“The Street wants and NEEDS answers next week,” Ives emphasized in a recent note. He pointed out that the accumulation of negative news has turned the past months into a “horror show” for investors, underscoring the importance of the upcoming earnings call for stabilizing the company’s narrative.
Investors are particularly keen to understand the rationale behind the recent layoffs, the future strategy, product developments, and Musk’s overarching vision for Tesla. Ives warned that without satisfactory explanations and a convincing outlook, investor support could wane dramatically during what he termed a “Category 5 perfect storm” of global demand weakness that Tesla faces in 2024.
Tesla’s struggles are not isolated to the U.S.; demand in China has also been weak, further dampening sentiment around the company’s stock. Since the beginning of the year, Tesla shares have plummeted by 35%, with several financial institutions lowering their price targets for the automaker.
Despite these challenges, Wedbush maintains an “outperform” rating on Tesla with a price target of $300 per share, suggesting a potential 83% upside from current levels. This optimistic projection hinges on Musk’s ability to take decisive action to address the company’s current issues and minimize distractions.
As Tesla prepares for its critical earnings discussion, the financial community and Tesla’s vast investor base will be watching closely, hoping that Musk’s responses can steer the company back towards a more stable and promising trajectory.