Tesla Stock News and Forecast: TSLA stock under pressure as Elon Musk announces plans to cut staff by 10%

Tesla (TSLA) stock looks set for more selling pressure once the regular session gets underway on Friday as CEO Elon Musk has reportedly announced a hiring freeze and plans to cut staff levels by 10%. Tesla had been recovering from some heavy selling pressure in May and had moved from $620 to $775 as equity markets recovered ground. However, this latest announcement may put more pressure on the electric vehicle leader.

Also read: Tesla Stock Deep Dive: Price target at $400 on China headwinds, margin compression, lower deliveries

Tesla stock news: Hiring freeze and 10% layoffs

Reuters exclusively announced this morning that Elon Musk has emailed Tesla executives to say he has a "super bad" feeling about the economy and wants to pause all hiring and cut approximately 10% of all jobs at Tesla. Tesla employs about 100,000 people currently.

This is yet another headwind this year for the automaker. Lockdowns in China led to its Giga factory in Shanghai having to suspend production and to a severe dent in Chinese orders. The factory is now getting back up to full capacity, but it may be another while before it is back to 100%. Tesla also faces problems with the supply of semiconductors, which is a recurring theme for all tech companies and automakers. 

Tesla also faced growing scrutiny for an email sent earlier this week by Elon Musk requiring all Tesla employees to return to the office. "Everyone at Tesla is required to spend a minimum of 40 hours in the office per week," Musk said. "If you don't show up, we will assume you have resigned." We did notice many on social media highlighting the fact that it could be a stealth means of shedding staff, and this latest news will only serve to add fuel to those theories.

Tesla is not alone in shedding staff. While the job market remains tight and many companies in the service industry are struggling to attract workers, other companies facing post-pandemic slumps are going in the opposite direction. Netflix recently announced 150 job cuts, Amazon slowed hiring plans in its retail business, and Coinbase has rescinded some accepted job offers. 

Also read: Apple Stock Deep Dive: AAPL price target at $100 on falling 2023 revenues

Tesla stock forecast: $620 remains a huge support

The premarket has just resumed, and Tesla stock immediately fell 2.5% to $756 on the back of this news. $620 remains the huge support level for Tesla and once again may be targeted. Friday's jobs report does have the power to change equity sentiment, but we feel Tesla is likely to underperform the market regardless after this latest news. 

This week Tesla formed the dreaded death cross, which is when the 50-day moving average crosses below the 200-day moving average. Generally, this is a bearish sign. 

You will notice from the disclaimer below that I am short Tesla. This is partly a play on continued bearishness for the overall equity market. With Tesla trading on a high P/E and EV/EBITDA multiple, it is overvalued compared to the rest of the sector and market. Also, assumptions from most Wall Street analysts that Tesla will ultimately have a 15% market share of the EV market seem way too high in my estimation. The EV market will simply become the auto market as all vehicles switch to electric. Currently, Toyota is the largest vehicle manufacturer in the world and only has a 10% market share. I cannot see too many examples in the recent past where the market share for any one automaker has approached 15%. Tesla is a high-margin business but also at the top end of the market. Luxury brands are not usually associated with high market shares.

See our deep-dive analysis on Tesla here. We have broken down the valuation using DCF modeling (discounted cash flows) as well as comparative P/E and EV/EBITDA, comparing against big tech, auto and the Nasdaq averages. We settled on a $400 price target for Tesla for the next 12 months. Feedback is always appreciated. This is premium content that we are currently offering for free as it involves investment bank-style research.

The author is short Tesla and Twitter.