Is Tesla on the Verge of a Breakdown?

Is Tesla on the Verge of a Breakdown?

Posted On January 21, 2019 2:26 pm

Elon Musk has long defied the skeptics as he went on to build a solar, space ship and have an electric car company. In the process, shares of his company Tesla (TSLA) have both defied gravity and befuddled the bears.

But, it seems that the company is now facing some operational realities with cracks are beginning to show in the business.

On Friday, Tesla’s shares plunged 12% — it’s largest one day drop in over year, to $302 per share after the company announced plans to lay off 7% of its workforce.

This is the second round of job cuts since June and also comes on the heels of the company being forced to cut prices on its vehicles to compensate for a reduction in U.S. tax incentives for buyers, which will eventually be phased out. It’s slated to happen in May of this year.

Strangely enough, it was just two quarters or so ago when Tesla announced, in terms of layoffs, that Elon Musk said, “I also want to emphasize that we are making this hard decision now so that we never have to do this again.”

Too Expensive, Too Little Demand

The usually upbeat Musk took a decidedly more dour tone in this latest message writing, “our products are still too expensive for most people. It seems we likely have burned through accumulated higher priced orders, exposing…

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Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.