Tesla Is Planning a Second Stock Split - Is Another Rally Imminent?


Tesla shares jumped after the company announced plans for a second share split. Analysts welcome this move by Tesla, predicting further growth in shares.

Tesla (TSLA) shares, which were up 63.35% in the last year and 26.2% in the last month, were up 7% on Monday.

The rise came amid news that Tesla's Board of Directors has approved a proposal by the company's management to increase the number of shares to ensure their split. This is evidenced by the document Form 8-K, filed with the US Securities and Exchange Commission (SEC).

While it is not clear what the split will be, its date and other amendments will be adopted at the 2022 AGM, which is expected in October.

Wall Street analysts say that although the stock split does not bring fundamental changes, it will make Tesla's share price more accessible to investors and could be an excuse for inclusion in the Dow Jones index. Tesla shares were added to the S&P 500 index at the end of December 2020.

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Traditionally, stock splits drive up stock prices because they are seen as a sign of management's confidence that stocks will continue to rise, analyst Mark Hulbert told AtoZMarkets.

Anyway, the math is simple, $200 stocks are easier to buy than $1,000 stocks (if Tesla repeats the 5-to-1 split). If the split is implemented, it will be the second Tesla stock split in two years. The company made its first 5-to-1 split in 2020, when the automaker's shares were worth roughly $500.

Tesla shares closed at $1,011 on Friday and were worth over $1,091 on Tuesday at the time of writing.

Ahead of the previous split and addition to the S&P 500 index, Tesla shares rose significantly, followed by a temporary pullback and a new growth spurt.

Earlier in 2022, Google's parent company Alphabet and Amazon announced a split of their shares. Shares of Alphabet (GOOGL, GOOG ) jumped 7.5% after announcing a 20:1 stock split in early February and are still up about 3% compared to a 1% loss for the Nasdaq Composite.

Read also: Should We Expect Google Stock to Rise in 2022?

Amazon.com (AMZN) stock jumped 5.4% after the company announced plans for a 20-to-1 stock split. The stock is up about 18% since the announcement in early March, compared to Nasdaq's 7% gain over the same period.

"We view Tesla's move following the likes of Amazon, Google, Apple and initiating a second stock split in two years as a smart strategic move that will be a positive catalyst for the stock going forward," wrote Daniel Ives, an analyst at Wedbush Securities.

He rates Tesla shares with a Buy rating with a target price of $1,400.

The news of Tesla's upcoming stock split offset some of the company's bad news. According to reports, the Tesla factory in Shanghai is closed for several days due to restrictions related to the Covid-19 pandemic. The closure comes just before the end of the quarter and could cost the company several thousand vehicle deliveries. Wall Street analysts expect Tesla to deliver 310,000 to 320,000 vehicles in the first quarter of 2022.

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