Stock Market

Should You Buy Tesla (TSLA) Stock Before June 13?

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Electric vehicle (EV) manufacturer Tesla (NASDAQ:TSLA) slipped again on Friday as investors digested the drama clouding its narrative. On June 13, the company will hold its annual shareholder meeting. Unlike previous editions, multiple concerns have been soaring to the forefront, putting TSLA stock in a difficult position.

Arguably at the forefront of the matter is Tesla’s mass layoffs. Mere weeks after the EV maker revealed that it would cut its employee overhead by 14,000, management announced that it would slash even more jobs. Earlier this week, the company declared that workers across multiple units — including software, engineering and service — will face the axe.

What particularly worries TSLA stock stakeholders is that the cuts impact roles that require education and acumen, such as user experience (UX) design. However, management has characterized the layoffs as an effort to remove redundancies. Still, the chopping block activity coincides with Tesla’s declining revenue, while legacy automotive manufacturers have seen their EV sales rise.

Another area of concern is the management of Tesla’s EV charging network, Supercharger. Recently, the company rattled nerves when it cut 500 employees from this business unit. The pink slips extended to the unit’s top executive, Rebecca Tinucci. At the same time, Tesla CEO Elon Musk pledged to grow Supercharger despite the layoffs.

TSLA Stock Squares Off Against Multiple Challenges

While TSLA stock enjoys strong support among retail investors, this commitment may be put to the test on June 13. As Morgan Stanley analysts pointed out, the shareholder meeting will play a major role in the company’s “long-term strategic direction.”

“While impossible to predict the outcome, we expect the event could drive material volatility in the stock,” the experts wrote in a research document. Among the matters that shareholders will vote on is Musk’s contentious compensation package. Earlier in the year, a Delaware judge sided with an investor lawsuit against Tesla, arguing that the compensation structure is “excessive.”

Morgan Stanley noted that among Musk’s portfolio of businesses, Tesla represents the only one in which he either lacks control or a blocking minority vote.

As if that wasn’t enough drama for TSLA stock, Tesla may have to answer potential criticisms tied to the cancellation of its long-anticipated low-cost “fighter” car that would help drive top-line expansion. It’s a glaring contrast to Musk’s earlier vision when he talked about establishing a footprint in the luxury segment first before leveraging profits to finance a “low cost family car.”

Unfortunately, fierce competition from Chinese manufacturers has dented those plans, adding more questions about TSLA stock.

Should You Buy Tesla Stock?

For bullish prospective investors, much will depend on whether the market can establish a support baseline for TSLA stock. However, it’s an extraordinarily difficult proposition because of the competitive landscape. Not only have legacy automakers upped their EV game, but hybrid vehicle sales have skyrocketed.  Such headwinds will likely impede Tesla’s immediate addressable market.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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