Tesla Mulls Stock Split: Why This Analyst Says It's A Smart Strategic Move

Tesla, Inc. TSLA announced in an 8-K filing Monday it will seek shareholder approval for increasing its authorized share capital to allow a stock split in the form of a stock dividend.

Tesla's board has vetted the proposal and shareholders will vote on it at the company's 2022 annual meeting.

An analyst at Wedbush sees the potential stock split as a catalyst for the EV stock. 

The Tesla Analyst: Daniel Ives maintained an Outperform rating and $1,400 price target for Tesla shares.

The Tesla Takeaways: A second split of Tesla stock in as many years is a "smart strategic move" that will serve as a catalyst for shares going forward, Ives said in a note.

Tesla's previous 5-1 stock split announced in August 2020 led to a meteoric rise in shares, the analyst noted. This could be the reason for the proposed move, especially as EV demand remains robust, with the flagship Berlin and Texas Giga factories online. 

Tesla shares are trading about 19% off their all-time high of $1,243.49 reached on Nov. 4, 2021.

Tesla is moving in the footsteps of tech giants such as Amazon, Inc. AMZN, Alphabet, Inc. GOOGL GOOG and Apple, Inc. AAPL, Ives said.

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The chip shortage is expected to moderate into the rest of 2022, the analyst said. Yet the impact of the Ukraine conflict on Europe isn't yet clear, he added.

"While China will be a key growth driver, we believe demand is rapidly building for Tesla's Model Y with 2022 so far looking like another 'breakout year' for Tesla and the EV industry," Ives said.

Tesla, the analyst said, has the potential to further expand its auto gross margin and profitability profile over the next 12 to 18 months, especially with an increasing number of higher-margin cars being sold and produced in China.

TSLA Price Action: Tesla shares were rising 5.4% to $1,065 Monday morning.

Photo courtesy of Tesla.