Tesla News (TSLA) laying the groundwork for its second stock split in two years has analysts and investors alike optimistic, with shares rising 8% on Monday following the news.
According to Wedbush Securities managing director Dan Ives, the electric vehicle maker is on the right track.
“Tesla is in a massive position of strength right now in terms of where it’s going from a manufacturing perspective, in terms of Berlin, Austin and overall demand,” Ives said on Yahoo Finance Live (video above ), later. adding, “They have this high class problem of a four-digit stock. And I think that’s something where you could always have the debate, but a stock split is a smart strategic move for Tesla, all like for Amazon, just like it was for Google, as well as for Apple.”
A stock split would change the price per share of Tesla shares, but not the overall value of those holdings.
A Tesla recently regulatory filing showed that the electric vehicle maker plans to seek shareholder approval at its next annual meeting to increase the number of authorized common shares to “allow for a stock split”.
“It’s really the world of Tesla and everyone else pays rent”
In early August 2020, Tesla announced a stock of five for one knocked down which sent the stock price to an all-time high of $2,000. Following the stock split, the price per share was reset to around $460.
Tesla shares fell earlier this month after CEO Elon Musk tweeted that the company was facing inflationary pressures. The stock has since rebounded to over $1,000 per share.
“You’re not buying it because of a stock split,” Ives said. “You buy it because basically where you think it’s going to go, but the stock split is going to be something that’s a catalyst. It’s been rumored for four or five months. And I think that was smart to go out there.”
Tesla’s board has approved management’s proposal but has not yet approved the actual stock split, according to the filing.
Ives thinks the timing of the stock split announcement is “bullish” following the grand opening of Tesla in Berlin and the upcoming production facility in Austin, Texas. CEO Elon Musk opened Tesla’s first European factory in Germany last week, which will employ 12,000 people and produce 500,000 vehicles a year.
“[A] company that’s going to do its second spinoff in two years isn’t doing it because it’s in a weak position,” Ives said. “I think it shows a position of strength, of confidence.”
And as the company goes through the first quarter, he added, “you’re going to see more and more momentum, especially from a manufacturing perspective. You’ve got the barbecue from the 7 April in Austin where it cuts the ribbon there And despite all the noise, despite all the competition right now, Tesla, at least in EV country, it’s really Tesla world and everybody else is paying rent .”
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv