Right-sizing operations is part of Tesla’s long term goal to democratize the EV market — and that’s a big positive for Tesla, Inc. (NASDAQ:TSLA) stock

Right-sizing operations is part of Tesla’s long term goal to democratize the EV market — and that’s a big positive for Tesla, Inc. (NASDAQ:TSLA) stock

Right-sizing operations is part of Tesla’s long term goal to democratize the EV market — and that’s a big positive for Tesla, Inc. (NASDAQ:TSLA) stock

It seems electric vehicle manufacturer Tesla (NASDAQ:TSLA) is always in the headlines. But over the past several weeks, the Tesla headlines have been dominated by one common theme: job cuts. In late January, Tesla announced that it would cut about 7% of its workforce. Ever since, there have been a slew of reports regarding Tesla layoffs, all of which seem to strike the same bearish tone that job cuts are indicative of dwindling Tesla popularity and demand following the big, late-2018 Model 3 surge.

Ever since Tesla announced big job cuts in late January, Tesla stock has dropped from $350 to $310.

But, this “job cuts are bad” mantra is the wrong takeaway here, because it ignores the “why” behind the job cuts. Tesla is cutting jobs not because demand is falling. Rather, the company is right-sizing operations in order to continue to drive EV prices down. That’s a big positive. Falling EV prices will translate into broader vehicle adoption, bigger sales and bigger profits.

Those three things will lead to a higher Tesla stock price.

Thus, job cuts are actually good for Tesla stock. They lay the groundwork for this company to continue to democratize the EV industry so that, eventually, everyone and anyone can afford a Tesla vehicle. So long as Tesla remains on that growth trajectory, Tesla’s delivery volumes, revenues and profits will roar higher — and so will Tesla stock.

Job Cuts Are a Positive

Everyone seems to be beating this drum that job cuts at Tesla are a sign of tough times. To be sure, no one cuts jobs when times are great. But these job cuts aren’t a negative development for Tesla stock. Instead, they are quite the opposite.

The formula here is simple: Tesla cuts jobs and right-sizes operations. This pulls costs out of the system. When the overall cost structure of the business is lower, that allows Tesla to lower the prices of its vehicles, too. Lower prices supercharge demand and broaden customer reach. That leads to much higher vehicle deliveries at slightly lower average prices. Revenues march higher. Gross margins remain stable. Profits soar. Tesla stock soars too.

From this perspective, job cuts are simply the first step in a long-term winning formula for Tesla stock.

The market doesn’t see it that way, though. Tesla stock has dropped more than 10% since job cuts were announced. This irrational weakness is an opportunity. In mid- to late-2019, because of early 2019 job cuts, Tesla will release lower-priced variants of the Model 3. Those lower-priced variants will be met with huge demand. That will drive revenues and profits way higher.

Investors will rally around that robust profit growth in mid- to late-2019, and Tesla stock will bounce back.

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 319.75.

The projected upper bound is: 347.49.

The projected lower bound is: 274.69.

The projected closing price is: 311.09.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 45.2603. This is not an overbought or oversold reading. The last signal was a sell 3 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 47.77. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 106 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 65. This is not a topping or bottoming area. The last signal was a buy 12 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 7 period(s) ago.

Rex Takasugi – TD Profile

TESLA INC closed down -1.030 at 311.810. Volume was 35% below average (neutral) and Bollinger Bands were 13% narrower than normal.

Open High Low Close Volume___
316.200 318.190 309.620 311.810 5,517,570

Technical Outlook
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 311.74 328.39 316.06
Volatility: 38 72 74
Volume: 7,524,851 7,645,008 9,081,546

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

TESLA INC is currently 1.3% below its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of TSLA.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on TSLA.O and have had this outlook for the last 3 periods.

The following two tabs change content below.
HEFFX has become one of Asia’s leading financial services companies with interests in Publishing, Private Equity, Capital Markets, Mining, Retail, Transport and Agriculture that span every continent of the world. Our clearing partners have unprecedented experience in Equities, Options, Forex and Commodities brokering, banking, physical metals dealing, floor brokering and trading.

You must be logged in to post comments :  
CONNECT WITH