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Stock Market Wrap-Up: Tesla Might Not Deliver; Coronavirus Spurs Sysco Layoffs

By Dan Caplinger - Updated Mar 31, 2020 at 8:01AM

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The stock market gained some ground Monday to bounce back from Friday's losses.

The stock market gained ground on Monday, spurred by some optimism about the potential impact of the coronavirus stimulus bill that passed last Friday. Various components of the Dow Jones Industrial Average (^DJI -0.52%) got pulled in different directions, with some rising on hope that they'll help in solving the coronavirus crisis, while others fell on concerns that they'll suffer more pain before a solution comes. Gains for the Dow, S&P 500 (^GSPC -0.39%), and Nasdaq Composite (^IXIC -0.72%) ranged between 3% and 4%.

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Data source: Yahoo! Finance.

Even with the gains, though, not all stocks managed to rise. Tesla (TSLA -0.47%) saw its stock drop slightly, as investors fear that the electric-car manufacturer won't be able to live up to their expectations with its first-quarter results. Meanwhile, food service giant Sysco (SYY -0.42%) had to resort to layoffs and furloughs across some of its workforce, as its client base of restaurants, entertainment venues, and other food service operations remains under pressure from the coronavirus.

How low could deliveries go for Tesla?

Tesla saw its stock fall more than 2% Monday. The drop came amid some doubts about the electric-vehicle specialist's ability to make good on delivery projections for the first quarter.

Model 3 vehicle on a road in front of a scenic background.

Image source: Tesla.

Analysts at Morgan Stanley (MS -2.66%) questioned Tesla's ability to meet the average Wall Street projection for 97,000 vehicle deliveries in the quarter that will end Tuesday. Tesla has historically relied on last-minute pushes from its employees and devoted customers to get vehicles delivered in time to appear on financial statements. But with the pandemic having imposed stay-in-place orders in several key markets across the country, the usual options for bumping deliveries higher aren't available.

As a result, Morgan Stanley now expects that deliveries for the first quarter will probably come in at just 88,000. Some other investors believe that an even lower number is possible. Price targets for the stock have been coming down as well, with Morgan currently at $440 and some other analysts setting target prices as low as the mid-$200s.

Tesla has defied naysayers in the past, but it's unlikely to escape the downward impact of the coronavirus entirely. Long-term investors can hope for share prices to fall briefly due to short-term effects, but then to bounce back once Tesla's brand strength and loyal customer base assert themselves and push the stock up over the long run.

Sysco looks to control costs

Shares of Sysco fell 8% as the food service provider became the latest company to take measures to protect its financial condition in the wake of the pandemic. The move included layoffs and furloughs to try to cut costs, but it also went beyond the workforce.

Sysco disclosed to the Securities and Exchange Commission Monday that it had taken steps over the past two weeks to reduce its workforce through a combination of hiring freezes, furloughs, and other headcount reductions. It also said that it would take other steps to improve financial liquidity, halting its stock buyback program, and drawing down $1.6 billion from its $2 billion revolving credit facility.

Workers could get some good news, though. The company recently announced it would work with grocery retailer Kroger (KR -0.60%) to let some Sysco employees work within Kroger's operations. The partnership could ease some of the financial pain from layoffs and furloughs while providing Kroger with extra labor to handle high demand in delivering food and other essential items to grocery customers.

Investors weren't excited about the moves, though, and some are worried about whether Sysco will be able to sustain its dividend. The longer that coronavirus-related disruptions to restaurants and other food service venues continue, the more difficult it'll be for Sysco's financial condition.

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Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
$682.24 (-0.47%) $-3.23
Sysco Corporation Stock Quote
Sysco Corporation
$84.45 (-0.42%) $0.36
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$30,868.88 (-0.52%) $-160.43
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,803.98 (-0.39%) $-14.85
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$11,096.99 (-0.72%) $-80.90
Morgan Stanley Stock Quote
Morgan Stanley
$76.11 (-2.66%) $-2.08
The Kroger Co. Stock Quote
The Kroger Co.
$47.82 (-0.60%) $0.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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