Tesla Inc (Nasdaq: TSLA) stock was trading flat on Wednesday, a day after it told employees it would be laying off about 9 percent of its workforce. Following the announcement Tuesday afternoon, TSLA stock shed $15 per share but still finished the day up more than 3 percent on renewed optimism about Model 3 production.
Tesla CEO Elon Musk announced a “thorough reorganization” of the company in May, and Musk said on Tuesday the reorganization will involve eliminating 4,100 salaried positions. After Musk’s email to employees announcing the cuts leaked to the media, he tweeted the full email, adding that the job cuts were a “difficult, but necessary” decision.
Tesla had previously added about 8,000 jobs in 2018.
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Tesla is likely aiming to trim payroll costs as the company works torward Musk’s ambitious claims that Tesla will be profitable and cash-flow positive by the third quarter of 2018. In the first quarter, Tesla reported net operating cash outflows of $398 million and a per-share earnings loss of $3.35.
In Tuesday’s letter, Musk said the company’s lack of profitability is a “valid and fair criticism of Tesla’s history to date.”
Despite Tesla repeatedly failing to hit previous Model 3 production targets, TSLA stock is up 13.8 percent in the past month after Musk projected Tesla would finally hit its goal of 5,000 vehicles per week by the end of June.
According to the latest round of sales center checks, KeyBanc analyst Brad Erickson says Model 3 deliveries are tracking well above his previous estimates.
“Based on our conversations with 20 sales centers across the U.S. (18 percent of total), we believe weekly run-rate volumes have moved from the high teens per store per week to the low 30s since our last checks in mid-April,” Erickson says.
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Erickson says Tesla is on track to deliver between 30,000 and 35,000 Model 3s in the second quarter, about 50 percent more than his previous estimate of between 20,000 and 25,000 vehicles.
However, Erickson says there are already high expectations priced into TSLA stock.
“Our rating is built on the core belief that there is significant premium built into the stock on perceptions of the company’s innovative superiority,” Erickson says.
KeyBanc has a Sector Weight rating for TSLA stock.
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Tesla Inc (TSLA) Investors Shrug Off Job Cuts originally appeared on usnews.com
