On
April
15,
Tesla
(TSLA)
shares
fell
3%
on
news
of
the
firm’s
plan
to
lay
off
more
than
10%
of
its
workforce,
as
well
as
the
departure
of
at
least
one
high-level
executive.
The
move
is
consistent
with
Tesla’s
strategic
shift
toward
profitability
over
delivery
growth
in
2024.
The
company
has
historically
adjusted
its
workforce
based
on
its
strategy,
hiring
during
periods
of
growth
and
reducing
headcount
during
slowdowns.
•
Morningstar
Rating:
3
stars
•
Morningstar
Economic
Moat
Rating:
Narrow
•
Morningstar
Uncertainty
Rating:
Very
High
Tesla
Earnings
in
View
Following
the
decline
in
first-quarter
deliveries,
we
think
Tesla
will
reduce
costs
in
2024
to
maximise
profits.
This
reflects
our
view
that
the
firm
will
aim
to
stabilise
unit
gross
profit
margins
in
the
automotive
segment
and
focus
on
improving
companywide
operating
profit
margins.
Because
of
this,
we
see
no
reason
to
change
our
outlook
for
the
company,
and
we
maintain
our
$195
fair
value
estimate
and
narrow
moat
rating.
We
will
update
our
model
after
Tesla’s
earnings
update
next
week,
but
we
view
its
shares
as
slightly
undervalued
at
their
current
price.
The
stock
trades
around
15%
below
our
fair
value
estimate,
though
still
in
3-star
territory.
Accordingly,
we
recommend
investors
wait
for
a
larger
margin
of
safety
before
considering
entry.
One
of
Tesla’s
key
departures
was
Drew
Baglino,
its
senior
vice
president
of
powertrain
and
engineering.
Since
he
was
likely
working
on
the
powertrain
for
the
new
affordable
vehicle,
the
headcount
reduction
may
relate
to
potential
delays
in
that
model.
We
hope
Tesla’s
management
will
clarify
its
strategy
during
the
call,
including
its
current
plan
for
the
affordable
vehicle
platform.
We
also
hope
to
hear
its
view
on
the
company’s
ability
to
generate
long-term
growth
with
a
smaller
workforce.
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