Tesla shares fall to 15-month low ahead of earnings as Wall Street worries about price cuts, layoffs

Tesla shares fell for a seventh straight day to hit their lowest level since January 2023, with further price cuts over the weekend fueling concerns about the company's first-quarter earnings report on Tuesday.

The stock fell 3.4% to $142.05 on Monday, bringing its year-to-date decline to 43%, the second-worst among S&P 500 stocks.

Tesla cut prices in the United States, China and across Europe, reducing the Model Y SUV and entry-level Model 3 sedan, the company’s most popular electric vehicle, by as much as $2,000. Tesla also cut the price of its advanced driver assistance system by a third. The system is marketed as the Full Self-Driving, or FSD, option, although it requires a human driver ready to steer or brake at all times.

The FSD option, which previously cost $12,000 or $199 per month for most customers in the U.S., is now priced at $8,000 and $99 per month on Tesla's website. The price cut follows a one-month free trial that Tesla launched to North American customers starting in late March.

The latest cuts add to growing investor concerns following weak first-quarter deliveries, layoffs and the Cybertruck recall.

Last week, Tesla announced a voluntary recall of 3,878 Cybertruck vehicles to fix a serious "trapped pedal" defect that appeared in a viral TikTok video posted by a Cybertruck owner.

According to a filing with the National Highway Traffic Safety Administration, a pad on top of the Cybertruck's accelerator pedal could come loose and get stuck in the interior, causing "unintended acceleration."

The recall and price cuts come after Tesla initiated a dramatic and messy restructuring, notifying employees early last week that it would cut more than 10% of its global workforce. The layoffs are still ongoing, with some employees receiving notices that their jobs were eliminated in the past few days, according to two current employees who asked not to be named in an interview with CNBC.

Tesla plans to hold a conference call to discuss first-quarter earnings Tuesday afternoon after the release of results. Analysts expect revenue to fall 5.1%, which would be the first year-over-year decline since the second quarter of 2020, when the coronavirus pandemic disrupted operations, according to LSEG.

"Sentiment on Tesla (TSLA) has deteriorated since late 2023," Bank of America analyst John Murphy wrote in a note Monday. Murphy said he expects investors to "focus heavily on commentary related to growth initiatives," particularly the Model 2 "next-generation platform" and robotaxis.

Reuters reported that under Musk's guidance, Tesla "abandoned" plans to launch a very affordable Model 2 electric car in the near future and will focus on developing robotaxi.

Investors should "expect some fireworks" on the call, UBS analyst Joseph Spak wrote in a note Monday, adding that Tesla's automotive gross margin (excluding environmental credits) and free cash flow will be key metrics.

"A negative free cash flow quarter seems likely," Spak wrote. That cash becomes more important to Tesla's story because "the current environment does not allow for simultaneous funding" of robotaxis and a new, more affordable electric car.

Traders who shorted Tesla are profiting from the drop in its share price.

As of Monday morning, short interest in the electric car maker stood at about 111 million shares, or 4% of outstanding shares, with a notional value of $16.3 billion, according to S3 Partners. Tesla short sellers have made an estimated $9.4 billion this year, making them the most profitable short sellers in the U.S. market, far surpassing Apple, which is worth $3 billion.

—Michael Bloom of CNBC contributed to this report.