Tesla Stock Holds Up after 3-for-1 Stock Split

Investors seemingly went on about their day as normal in the first day of trading after Tesla Inc.’s 3-for-1 stock split.

Tesla’s 3-for-1 stock split hit the market today to a collective … yawn? However, plenty of analysts are excited.

The stock split after Wednesday’s close finishing at 297.10. It opened today at $302.36 a share, but then lost nearly 10 points in the first 30 minutes. Aside from a few jumps into the $297 range, the stock’s hovered in the $292 to $294 range for most of the day.

Although investors didn’t go crazy as they did with the split in August 2020 when they jumped 81% — passing $2,000 a share — between the announcement of the split and the day of the split. The stock didn’t perform quite the same when the split was proposed in late March, jumping 8% the next day, but it slid from that $1,090 a share to $891.29 just before the 3-for-1 split at yesterday’s close.

To accomplish the split, everyone who held a share got two more by the company paying a stock dividend when they woke up today. The company’s market cap is nearly $306.7 billion at the end of trading Thursday. The stock closed at $296.07 on a last-hour rally that saw it pickup nearly five points.

Investors yawn while analysts fawn

Although the price didn’t move a whole lot, the split gave analysts a chance to talk about Tesla’s future and they are optimistic — or better.

Despite several pandemic-related shutdowns in the first part of the year, Tesla’s Shanghai plant is reportedly going to push out 1 million vehicles in 2022.

“I love Tesla. We’ve been investing in Tesla for about eight years now, since 2014,” said Ron Baron, Baron Capital chairman and CEO, on CNBC. “Made about 20 times our money, made about $6 (billion) or $7 billion on a $380 million investment. I think we’re going to make 3-5x our money again over the next 10 years. (In) the next 10 years I think Tesla is going to be largest company in the world, and 10 years after that I think it’ll be challenged by SpaceX.”

Baron’s optimism is buoyed by the fact he believes it costs Tesla $7 billion to build each gigafactory. Each site has a run rate a 1 million vehicles annually and each vehicle brings in a gross profit of $15,000, thus each plant will make $15 billion annually when running at full speed.

“This is the most profitable company in the entire world,” he said.

Raising targets

Several analysts raised their price targets on Tesla today, including Wedbush analyst Dan Ives who raised his to $360 a share from $333. The initial target of $333 a share already factored the split, Ives made the change based on improving vehicle production numbers in China. 

“Demand is not the problem for Tesla, but supply has been and is now clearly on an upward trajectory,” he said.

Despite now having four plants up and running, Tesla’s considered putting a temporary stop on orders because it couldn’t keep up with demand.

After Tesla dealt with pandemic-related shutdowns in the beginning of the year, it would seem the company is finally unleashing the beast. Ives believes the company produce more 1 million vehicles annually “out of this key artery.” Must told investors earlier this year the company expected to deliver 1.5 million vehicles in 2022. If they company’s getting 1 million from China alone, that target seems very doable with Tesla’s other three plants online as well.

“For 2023 we believe 2 million deliveries potential and massive production capacity will be a significant advantage for Tesla in this EV arms race with competition coming from every angle and geography,” wrote Ives in a report Thursday.

He’s not alone, CFRA analyst Garrett Nelson who reaffirmed his “outperform” rating on the stock with a split-adjusted price target of $415. He thinks the stock split will act as a catalyst for Tesla.

“In our view, the stock split doesn’t change anything fundamentally — the impact is more psychological, as companies with improving prospects and rising stock prices tend to execute stock splits,” Nelson wrote in a report. “It’s worth mentioning that studies have shown that stocks that split tend to outperform the broader market in the 1-3 years following the split. A lower share price could also appeal to retail investors.”

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