the stock needs something to get it out of its recent slump. The company might be able to create a catalyst, but not a catalyst tied to new models, features or financial performance. Latest idea launched: Tesla could again divide its share.
The idea came from Gary Black. He is not new to Invest or to Tesla (ticker: TSLA). Black has a long history on Wall Street as a professional analyst and fund manager, most notably at Goldman Sachs Asset Management and Janus.
These days, Black shares investing thoughts primarily on
(TWTR) to nearly 78,000 subscribers who can read his mind and even download his financial projections.
Black tweeted on Tuesday that “it’s worth debating” when Tesla divides its shares again. Tesla announced a five-for-one split in mid-August 2020. Black reminded investors that from the time Tesla announced the split until the time it actually happened at the end of the month, stocks rose 81%.
Then, between the actual split and the end of the year, Tesla stock added another 42%.
Another split might not push stocks up 81% in a few weeks, but it could help pull the stock out of its recent funk. Tesla stock is down about 12% year-to-date, lagging behind comparable gains in the
Dow Jones Industrial Average
as well as other auto actions.
Whether a stock split is a positive fundamental catalyst for a stock is up for debate. The stock split is a reminder that a stock split does not change the fundamentals of a company.
Bulls split into stocks, on the other hand, say a split could make stocks more accessible for some retail traders, especially those who can’t always afford to build a position in a stock with an absolute price. relatively high.
More importantly, bulls believe a stock split signals investors that more good news is on the way. It’s an implied vote of confidence on the part of management as they see the title winning news ahead.
In this way, a stock split is not really its own catalyst. It pushes forward the equity gains of future catalysts.
In 2020, the good news that came after the split reached delivery forecasts for the year 2020 in the midst of the pandemic, as well as the inclusion of the stock in the S&P 500. Part of the division gains August shares could be attributed to these two factors.
In 2021, ongoing positive developments could include the start of production at new plants in Austin, Texas and Germany, as well as updates to Tesla’s driver assistance software known as Full Self-Driving, or FSD. Tesla is testing new versions of FSD on the road today. The company did not immediately respond to a request for comment.
Of course, for Black to call a stock split may sound like “talking about your book,” which is Wall Street jargon for speaking positively about positions you already hold. Black owns Tesla shares, but he also called for a stock split in July 2020, about a month before Tesla announced it would split its shares five for one.
His 2020 tweet is an impressive appeal – another reason investors should pay attention in 2021. Still, investors need to assess whether the number and importance of catalysts this year will match those of 2020.
For now at least, investors don’t seem to think another split is coming or that the setup for the rest of 2021 may be 2020. Tesla stock closed down 0.2% to close Tuesday at $ 623.90, despite Black’s suggestion. The S&P 500 closed almost flat.
Write to Al Root at email@example.com