Elon Musk isn’t one to hold back how he feels. The Tesla (NASDAQ:TSLA) CEO recently disclosed in an email to several executives that he has a “super bad feeling” about the economy. Reuters reports that the email, sent Thursday, featured the subject line “pause all hiring worldwide.” It didn’t stop there. Musk also stated that the company needs to lay off 10% of workers. It didn’t take long for this news to push TSLA stock down.
What’s Happening With TSLA Stock
TSLA stock has been falling since Reuters broke news of the email. It fell almost 5% in premarket trading today and hasn’t stopped since. As of this writing, it is down more than 6% for the day and shows no sighs of a rebound.
Why It Matters
Musk began the month by providing a different update for Tesla’s staff. He issued an email telling his workforce to either return to the office for a minimum of 40 hours per week or quit. Just two days later, he is getting ready to lay off 10% of the workforce he just ordered back. This is a dramatic turnaround, even for someone with Musk’s unpredictable nature.
The return to office order didn’t affect TSLA stock much, but today’s news certainly has. Musk’s grim prediction, paired with drastic action centered around staff reduction, hints at an upcoming quarter in which Tesla will produce fewer vehicles and other revenue drivers. Additionally, Musk has also delayed the company’s upcoming AI day, citing the need to finish the Optimus humanoid robot. Tesla missing deadlines is not unusual, but the timing of the announcement coincides with other bad news. Not a single announcement today is reassuring TSLA stock investors.
Musk’s take on the economy is not new. Plenty of experts have predicted that a recession will hit the U.S. in 2022. As InvestorPlace news writer Shrey Dua reports,
“According to some, the stage has long been set for an economic slump in the west. Inflation is running at its highest levels in decades, interest rate hikes continue to spook the highest growth industries, and supply chain hiccups stemming from Russia’s invasion of Ukraine don’t appear to be easing any time soon.”
That said, when someone as influential as Musk issues grim economic predictions, it is difficult not to notice, especially for investors in his company. Musk made clear during recent earnings calls that Tesla is focused on growth and scalability. A 10% workforce reduction doesn’t call to mind images of expanding production and rising sales.
What It Means
Musk did not provide much context in his email, failing to cite reasons for his “super bad” feelings about the economy. Tesla’s workforce is likely waiting anxiously to find out which departments and locations will see layoffs. But it is hard to ignore the fact that just a few months ago, the company celebrated the launch of two new factories, and TSLA stock rose amid bullish predictions.
Multiple analysts have reduced their TSLA stock price targets in recent weeks. Today’s news will likely lead to more bearish takes, which may push shares down even more.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
