Tesla’s layoffs and executive departures drove its share price up a bit this week. The well-known electric vehicle company laid off about 10% of its staff, affecting about 14,000 people or more. Two well-known executives also decided it was time to move on.
In response to the news, Tesla shares lost ground. The company’s value has been eroded this year, down 35% by the end of trading yesterday.
The year has not been kind to Tesla. It missed first-quarter delivery estimates, according to reports part-time for its Cybertruck production line and sees rivals in China market share with cheap EVs. Tesla, in other words, has helped boost the global electric vehicle market, but is losing some of its leadership in the same market.
Which may be more of a risk than it seems. The global car market is large, complex and filled with different manufacturers and brands competing for share. What is the risk of being a little smaller than expected? For Tesla, a lot. The company is currently valued at a price/sales multiple of 6.2x, per Yahoo Finance. GM? It is worth 0.34x. Passage? An even more modest 0.29x.
In human terms, for every dollar of car Tesla sells, it creates far more company value than its competitors. Why; Because many investors are betting that Tesla will not only continue to grow its EV business that has become a profit center in recent years, but that its work in energy, energy storage and related industries will create a company that is much bigger. and many more precious in time. If Tesla were to trade at a GM or Ford-style multiple of earnings, it would wipe out most of its value.
And with price cuts, falling deliveries, increasingly sophisticated competition and now mass layoffs, Tesla is starting to look more like a traditional company than one that can avoid traditional business rules and do business with its peers. Play play let’s talk!
