Tesla shares slide to 15-month low ahead of earnings, as Wall Street frets over price cuts, layoffs

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Tesla shares slide to 15-month low ahead of earnings, as Wall Street frets over price cuts, layoffs

Elon Musk speaks onstage during The New York Times Dealbook Summit 2023 at Jazz at Lincoln Center on November 29, 2023 in New York City. 

Slaven Vlasic | Getty Images

Tesla shares fell for a seventh straight day, reaching their lowest since January 2023, as further price cuts over the weekend added to mounting concerns heading into the company’s first-quarter earnings report Tuesday.

The stock dropped 3.4% on Monday to close at $142.05, bringing its decline for the year to 43%, second worst among members of the S&P 500.

Tesla cut prices in the U.S., China and throughout Europe, with reductions of as much as $2,000 on the company’s most popular electric vehicles, the Model Y SUV and entry-level Model 3 sedan. Tesla also lowered the price of its premium driver assistance system by one-third. The system is marketed as the Full Self-Driving, or FSD, option, though it requires a human driver at the wheel, ready to steer or brake at any time.

The FSD option, which previously cost $12,000 up front or $199 per month on a subscription basis for most customers in the U.S., is now listed on Tesla’s website at $8,000 upfront and $99 for a monthly subscription. The price cut follows a monthlong free trial that Tesla pushed out to customers throughout North America starting in late March.

The latest reductions add to investors’ growing fears following weak first-quarter deliveries, layoffs and a Cybertruck recall.

Last week, Tesla issued a voluntary recall on 3,878 Cybertruck vehicles to repair a serious “trapped pedal” defect seen in a viral TikTok video from a Cybertruck owner.

According to a filing with the National Highway Traffic Safety Administration, a pad on top of the Cybertruck’s accelerator pedal could come loose and get trapped in the interior trim causing “unintended acceleration.”

Prior to the recall notice and price cuts, Tesla had initiated a steep and messy restructuring, informing employees early last week that it would be cutting more than 10% of its global workforce. The layoffs are ongoing, with some employees receiving notifications their jobs were eliminated in the last couple days, according to two current employees, who spoke with CNBC on condition that their names be withheld from publication.

Tesla plans to discuss first-quarter earnings on a call Tuesday afternoon after releasing results. Analysts are expecting a 5.1% drop in revenue, according to LSEG, which would be the first year-over-year decline since the second quarter of 2020, when the Covid pandemic disrupted operations.

“Since late 2023, sentiment on Tesla (TSLA) has deteriorated,” John Murphy, an analyst at Bank of America, wrote in a note on Monday. Murphy said he expects investors will “focus heavily on commentary related to growth initiatives,” specifically the Model 2 “next-gen platform,” and the robotaxi.

Reuters reported that, at Musk’s direction, Tesla is “scrapping” plans to launch a very affordable Model 2 electric car in the near term and will instead focus on development of a robotaxi.

Joseph Spak, an analyst at UBS, wrote in a Monday report that investors should “expect some fireworks” on the call, adding that automotive gross margins for Tesla, not including environmental credits, and free cash flow will be key metrics.

“A negative free cashflow quarter appears possible,” Spak wrote. That cash becomes more important to the Tesla story because “the current environment doesn’t allow funding of both” the robotaxi and a more affordable new EV.

Traders betting against Tesla are reaping rewards from the stock slide.

Short interest in the EV maker stood at around 111 million shares, or 4% of float, representing $16.3 billion in notional value as of the first half of the day on Monday, according to S3 Partners. Tesla short sellers are up an estimated $9.4 billion this year, making it the most profitable short in the U.S. market, way ahead of Apple at $3 billion.

— CNBC’s Michael Bloom contributed to this report.

WATCH: Tesla stock hits 52-week low ahead of earnings

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