Job cuts at Tesla are not quite the bad news as first seemed, several Wall Street analysts said Friday.
"Reducing headcount also suggests productivity gains," Jefferies analyst Philippe Houchois said in a note to investors. "This is, in our view, consistent with slower growth rates but mostly the scope to improve productivity and flow that we identified during our visit to the Fremont plant mid November 2018."
Hours before the note, CEO Elon Musk announced that Tesla is cutting its full-time staff headcount by about 7 percent. The cut represents about 3,150 layoffs, based on the most recent Tesla staff count of 45,000 from Musk in October. Jefferies estimated the job cuts would affect 3,200 to 3,500 people at the electric vehicle maker. Houchois said the "reduction was not unexpected."
"It's not a huge surprise to see this," Oppenheimer senior research analyst Colin Rusch said on CNBC's "Squawk Box."
"This looks to us like a mix of a proactive move in terms of cutting costs, ... but also a bit of cleanup on the kind of massive push to get the Model 3 out this year," Rusch added.
Four other analysts – Baird's Ben Kallo, Wedbush's Dan Ives, Canaccord Genuity's Jed Dorsheimer and Consumer Edge's Derek Glynn – also saw the cuts as largely positive.
"You never want to see a growth company cutting staff like this but we're not overly concerned," Rusch said.
Citigroup's Itay Michaeli was one of the few analysts skeptical of Tesla's future following the announcement. Michaeli said in a note that the company's lowered fourth quarter guidance and job cut announcement supports the "argument that Tesla's [third quarter] results weren't sustainable."
Tesla's stock fell 13 percent Friday, closing at $302.26 a share.
Here are the price targets for the analysts mentioned: Jefferies, $450 a share; Oppenheimer, $418 a share; Consumer Edge, $350 a share; Canaccord Genuity, $323 a share; Wedbush, $440 a share; Baird, $465 a share; Citigroup, $284 a share.
The growing electric vehicle market was also front of mind for analysts. The competitive landscape, or lack thereof, gives Tesla another advantage even as it expects to report a thin profit in its upcoming quarterly results. Morgan Stanley estimates Tesla made up 90 percent of the value of the EV market in 2018, with 80 percent of the sales.
"Where's the competition?" Morgan Stanley's Adam Jonas said in a note to investors published shortly before the job cut announcement.
Jefferies and Oppenheimer similarly pointed out how large a gap there is in EV sales between Tesla and the rest of the auto industry.
"We continue to be underwhelmed by competitive offerings which we believe extend Tesla's window of opportunity, but note that scaling to 500,000 annual Model 3 production will be challenging and require a capacity expansion," Rusch said.
"We believe Tesla continues to lead the industry as it moves Model 3 price point towards $35k while most competitors remain engaged in an EV negative margin sum game at higher price points," Houchois said.
– CNBC's Michael Bloom contributed to this report.