A Chinese newspaper has leaked news that Tesla (TSLA - Analyst Report) will be cutting back operations in China by laying off employees. Tesla has acknowledged that it will be scaling back in the country, but did not disclose how many employees it will be letting go in China. The Chinese newspaper said that the company could be eliminating up to 30% of employees in China; about 180 of its 600 employees in the country.
The reason why Tesla is cutting back on operations in China is due to the fact that it sold less than half of the vehicles it expected to in China. The Wall Street Journal reports that CEO Elon Musk had a goal of selling 5,000 vehicles in the nation. However, the company only managed to sell just under 2,500 units.
A lot of the blame on poor results in China stems from the fact that there is a lack of charging stations available for Tesla's electric vehicles. The company is battling this issue by making China the first nation where it will install free charging stations in the homes of its customers.
The overall sales forecast for Tesla was 35000 units in 2014, but the company actually only sold 31,600, selling about 10% less units than it expected to for the year. Living up to expectations is critical for Tesla. investors have pumped the stock up to trade at a price that is quite high for the actual earnings the company brings in.
Tesla is a Zacks Rank #3 (Hold). As expectations are crucial to the performance of the company's stock, it is worth noting that TSLA has missed on our EPS consensus in three of the last four quarters by an average of -135%.
The company also has an unusually high price/cashflow ratio of 143.61 for the most recent fiscal year. The trailing twelve month net profit margin is -9.19%, while the industry average is 2.46%. Stats like these suggest that TSLA is in need of meeting expectations across the board, and perhaps even surpassing a few, in order to give investors a reason to buy the stock at this point, and especially so following the bad news regarding the China division.
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