Tesla’s departures of Senior Vice President of Powertrain Drew Baglino and Vice President of Public Policy and Business Development Rohan Patel is being viewed as “a gut punch” and “unexpected” by Wedbush in a new note from Dan Ives.
Along with the at least 10 percent reduction in headcount, Tesla is going through “a dark day,” and next week’s Earnings Call now is set to be one of the biggest in the company’s history as it navigates between growth periods.
For Ives, Baglino’s departure is significant due to his potential influence on the “Model 2” program. According to some fans and analysts, the mass-market $25,000 vehicle’s moniker is the Model 2, but Tesla has not officially called the vehicle this.
Ives writes:
“Baglino is an absolute gut punch loss in our view as he was instrumental in the Powertrain and Energy initiatives at Tesla and was viewed by many as key to the Model 2 initiative over the next few years. The pressure on the stock today is being exacerbated by the Baglino news, which was very unexpected.”
The cost-cutting strategy of eliminating at least 14,000 employees is a proactive move as Q1 deliveries were “disastrous,” Ives writes in the note. However, damage control is necessary for the Earnings Call, which is scheduled for next week:
“The Street wants and NEEDS answers next week on Tesla’s 1Q conference call next Tuesday, April 23rd, after the bell, as the string of bad news over the last few months has been a horror show for investors in the Tesla story. We need to hear the rationale for the cost-cutting, the strategy going forward, product roadmap, and an overall vision from Musk otherwise, many investors might head for the elevators during this Category 5 perfect storm of weak demand Tesla is seeing globally in 2024.”
Wedbush says that the departure of the two key executives is “a fork in the road” for Musk as Tesla will need to get through the turbulence it has experienced or it will face darker days ahead.
Ives and Wedbush reiterated their $300 price target and an ‘Outperform’ rating but said, “The future of Tesla is a bit murky now.”
Tesla will need to give a clear roadmap and strategic vision for the Model 2, or it could face darker days ahead.
Tesla is down 5.12 percent at 3:06 p.m. EDT.
Disclosure: Joey Klender owns TSLA stock.
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