Tesla to vote on 3-for-1 stock split to increase investor accessibility
You’re here (TSLA) is still pretty much the biggest name in electric cars. Getting the stock, however, has been difficult recently. Its high price prevented some investors from buying. However, that may soon change. Tesla shareholders are set to vote later today at 4:30 p.m. PT on a three-for-one stock split that reports say will make Tesla’s stock ownership “more accessible to potential investors. Voting will not begin until the end of the trading day — 4:30 p.m. CT.
TSLA stock deepened this morning ahead of the new move, but is now roughly flat on the day.
The last 12 months for Tesla shares have been quite but positively volatile. The stock has risen over the past year, as it was trading at just under $700 per share at the start of August 2021. The stock price has gone through much of the end of 2021 and the start of 2022 above the $1,000 mark. Prices fell below $1,000 – and stayed there – from the end of April.
I’ve been bearish on Tesla lately, due to its high stock price and growing competition in electric vehicles. The competition part does not change much. It has only gotten worse thanks to most major automakers looking to enter the market.
However, Tesla’s move to make its stock more reasonably priced should draw some attention. So, I’m going neutral on Tesla stock.
Wall Street’s view on TSLA stocks
As far as Wall Street is concerned, Tesla has a moderate buy consensus rating. This is based on 18 purchases, six reservations and seven sales attributed over the past three months. Tesla’s average price target of $873.97 implies downside potential of 5.4%.
Analyst price targets range from a low of $73 per share to a high of $1,580 per share.
Tesla’s smart score isn’t impressive, insiders are selling
Tesla has a smart score of 6 out of 10 on TipRanks. This puts it almost perfectly in neutral; with a 10-point scale, there is no exact midpoint. This implies that the stock is likely to behave in line with the market in the future. However, there is the issue of insider trading. To call it “heavily sell-weighted” is an understatement.
Certainly, in the last three months, informative purchases have given Tesla a boost. Director Kimbal Musk bought $1.854 million in shares nine days ago, and CAO Taneja Vaibhav bought $138,300 two months ago. These numbers pale in comparison to the list of non-informative sales that have taken place since and before these moves.
Over the past three months, Tesla stock sales have outpaced purchases by eight to two. Looking back over the last 12 months inflates the ratio to nightmarish proportions, with 89 sell trades against just three buy trades.
Solve one of his problems
TSLA investors who bought, say, anytime before 2020 are thanking their lucky stars as their investment has been multiplied by 20 in some cases. Even simple investments of around $1,000 would have represented modest annual salaries for some people. Yet this rally posed its own problem for Tesla. Not everyone wants to pay nearly $1,000 for a stock. The stock split serves to make the stock more accessible to those who have not yet purchased. Good news in itself, sure, but that’s not all there is to consider here.
The stock split vote is part of Tesla’s Cyber Roundup event, and there’s good news and bad news for shareholders. There are, of course, ongoing issues between the United States and China.
The recent quick visit of Speaker of the House of Representatives Nancy Pelosi to Taiwan proved a sore point for China, which quickly mobilized much of its military to take part in training exercises nearby.
The good news is that Tesla may be able to significantly simplify its supply chain in the near future. Reports suggesting that Chinese battery maker Contemporary Amperex Technology Co. Limited, more commonly known as CATL, is delaying its US expansion plans seem overblown. The move is continuing, after all, Reuters noted, despite reports from Bloomberg that the move has in fact been delayed.
As CATL prepares to supply batteries to Ford (F) for its ambitions in terms of electric cars, it’s a safe bet that Tesla will be able to place a few orders itself and smooth out its supply chain. This has been a problem for almost every business in the world over the past few months. Taking steps to relieve these tensions should, in turn, help Tesla.
Conclusion: a good solution deserves a second look
The problems for Tesla largely remain. Simplifying its battery acquisition processes – assuming it can progress with CATL – will undoubtedly improve matters. Additionally, the stock split – assuming it happens, which reports suggest is likely – will go some way to attracting new investment.
CATL’s entry into the United States also underscores the increasingly competitive market Tesla faces. CATL is looking to supply batteries to Ford. The field of electric vehicles is no longer limited to Tesla and a handful of Chinese upstarts.
Tesla is taking smart steps to address its issues, and some of them are quite significant. So for now, keeping your distance while Tesla once again reinvents is probably the best strategy to adopt. Tesla’s stratospheric earning days are probably behind it. Still, it will likely remain the biggest fish in the pond for quite some time. That’s true even if some pretty big fish like Ford get involved.