Tesla Shares Rose despite Job Cut

By Joyce Yu

Philadelphia, PA–Shares of Tesla remain unchallenged after the company announced a 9% lay off of its workers, continuing to trend higher after a 40% rebound from its 52-week low in April. KeyBanc analyst Brad Erickson noted in a report that Tesla is expected to deliver 30,000 Model 3 cars in the second quarter, and nearly 120,000 for the full year.

The gain in Tesla’s shares is on the back of confidence the market has in the company’s ability to meet strong demand of its Model 3.  “Bears need evidence that Model 3 demand is softening or that production isn’t ramping,” Erickson wrote in his report, adding that this doesn’t seem likely in the near term.

In an email to employees on Tuesday, Tesla CEO Elon Musk announced the company was laying off 9% of its workers as part of a reorganization to help reduce costs and make the company profitable.  “Tesla has grown and evolved rapidly over the past several years, which has resulted in some duplication of roles and some job functions,” Elon Musk wrote. “We are making this hard decision now so that we never have to do this again.” The layoff, which will only target salaried employees, won’t affect production of the Model 3.

He also noted that Tesla has never made an annual profit — a point that’s often made by critics. “We will never achieve mission unless we eventually demonstrate that we can be sustainably profitable,” he wrote in the letter.

Tesla has been on a roller coaster for the past few months.  It took a hit earlier this year for concerns about whether the company could meet Musk’s ambitious goals and deadlines for Model 3 deliveries. This is in addition to negative news including a Model S recall, fears about Tesla running out of cash and high profile crashes involving Tesla vehicles.

CEO Elon Mus, however, spared no effort to make the situation worse – He “joked” in an April Fool’s tweet about the company going bankrupt, and angered the Wall Street by calling two analysts’ questions “boring” and “dry” during a conference call last month. Even though he eventually apologized for his “foolish” behavior, Musk still thought the questions were “boneheaded” and “absurd,” and claimed that the analysts were representing short sellers who are hoping to profit when Tesla’s stock goes down.

Despite Erickson’s bullish call, many analysts remain less upbeat on Tesla with an average price target 10% below its current price. One clear reason supporting this view is competition, not only from established auto giants like GM,  but also from other tech companies such as self-driving cars coming from Uber, Google. Furthermore, Musk simply has too much to take care of. Beside Tesla, he also runs SpaceX and is the founder of the tunnel digging/public transportation startup The Boring Company.

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