Shares of Tesla (TSLA -8.94%) were down 8.8% as of 11:17 a.m. ET on Friday after Reuters reported that Elon Musk sent an email to employees disclosing the need to cut about 10% of the company’s jobs. According to the report, Musk expressed a “super bad feeling” on the direction of the economy.
The news comes after Tesla delivered new records in revenue and profitability in the last quarter. Despite ongoing supply chain challenges, the electric vehicle (EV) maker delivered 310,048 cars and reported revenue growth of 81% year over year, with adjusted earnings per share (EPS) accelerating 246% year over year.
However, Musk’s email could signal that the growth streak is over for now. Many other companies have reportedly announced hiring freezes recently, including Microsoft (MSFT -1.64%), Meta Platforms (FB -3.89%), and leading online home goods retailer Wayfair (W -7.26%).
Tesla stock is down 32% year to date, which can probably be attributed to a high valuation as much as anything else, as the stock entered the year trading at over 200 times trailing earnings. Investors have turned on expensive growth stocks this year because of higher interest rates.
Analysts have been cutting their earnings estimates recently. The current estimate has Tesla reporting adjusted EPS of $1.96 this year and $2.29 next year. While earnings growth looked terrific in the last quarter, management said that higher unit vehicle costs and inflationary pressures on raw materials were affecting its structure.
Taking these factors into consideration, the recent hiring freezes by leading tech companies suggest that these economic headwinds might be worsening, and that’s a negative sign for earnings results in the next quarter.
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