Date: 21 Jan 2019

Tesla’s share price closed last week under heavy selling pressure, following the clean energy carmakers announcement of major job cuts to its workforce. Tesla closed down nearly 13 percent lower on the session, on the bearish news that 7 percent of the current 45,000 staff already employed at Tesla Motors would be laid off.

Tesla’s share price is likely to open Monday’s Wall Street session close to the key $300.00 level, following Friday’s steep decline and lack of dip-buying interest. Chief Executive Officer Elon Musk sent a memo to staff prior to the announcement being made public, stating that the job cuts were needed to reduce costs and increase productivity.

Musk also said the cuts were needed for manufacturing improvements to achieve economies of scale, with the visionary entrepreneur specifically referencing the popular mid-range Tesla Model 3 cars design. Analysts also pointed out when looking at the latest job cut announcement some perspective is needed, as Tesla actually increased its workforce by 30 percent in 2018.

More bearish news for investors came on Friday, with the admission that fourth-quarter earnings are likely to come in worse than the third fiscal quarters, although CEO Elon Musk hoped the company would still be able to post a small profit and close the quarter in the black.

Tesla posted a profit of $312 million in the third fiscal quarter, which sent the carmakers share price to an all-time high, as it marked the first significant quarter of profitability that the revolutionary carmaker had seen. Tesla is expected to release its fourth-quarter earnings report on February 6th, amidst a backdrop of rising tensions between major shareholders and CEO Elon Musk.

Tesla is planning to ramp up sales to the Chinese market, as the world’s second-largest economy has rampant demand for electric cars. The Chinese economy posted its worst growth figures in twenty-eight years earlier today, as the global economy cools amidst the ongoing trade war with the United States. Tesla also reported over the weekend that it is starting to recall over 14,000 Model S vehicles exported to China as part of the worldwide Takata airbag issue.

 

Tesla Inc. Daily Candlestick Chart. Source: ActivTrader Platform

Tesla Inc. Daily Candlestick Chart. Source: ActivTrader Platform

 

Technically this week is crucial for Tesla’s share price, if we see a strong break and weekly close below the December trading low, which is just under the $300.00 support level, we may see the share price drifting towards the October 2018 trading low just ahead of the release of Tesla’s fourth-quarter earnings report.

Any rebound or turn around back above the stocks 100 and 200-day moving averages may just provide the impetus for Tesla bulls to attempt to close the price gap on the charts, which was created by the stock’s quick drop on the NASDAQ on Friday.

 

Written by Nathan Batchelor, External Analyst

 

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