What happened
Shares of Tesla (NASDAQ: TSLA) jumped sharply on Friday, extending the stock’s torrid run over the past year. At 2:45 pm EDT, the task was up about 4.5%. This put shares above $ 2,090 – an unbelievable achievement considering the stock was at just $ 211 a year ago.
The growth of the growth stock is likely to be driven primarily by bullishness of investors prior to the planned share split of electric cars later this month. In addition, AdvisorShares CEO Noah Hamman, a market strategist, said in an interview with Yahoo! Finance on Friday that he thinks $ 2,000 per share could look “fairly low” for one to two years.
Tesla factory. Image Source: The Motley Fool.
So what
Shares of Tesla have now risen more than 800% in the past year. The increase in the share was driven primarily by impressive business performance, including increase in car sales in 2019, the rapid construction of a new factory in China, an earlier-than-planned Model Y launch in March, and promising construction progress at yet another new factory.
However, the enormous movement of the stock higher since August 11, however, seems to be primarily driven by the announcement by the company that it will split its share into five equal shares that together equal the value of what one Tesla- stock is currently trading.
Hamman told Yahoo! Finances on Friday that Tesla stock “is likely to continue to go up” to levels that even $ 2,000 seem like a reasonable entry point (on a split-adjusted basis, of course) one to two years from now. But Hamman warns that the stock’s appreciation has become “concerning”.
Well what
Tesla will have to prove to investors that the company is worth its $ 390 billion market capitalization. To do so, it will likely have to overhaul its 500,000 car deliveries this year and show substantial improvements in its Autopilot technology over the next 12 months to convince investors that their autonomous driving aspirations can become a reality.
Tesla shares will launch on August 31 on a split-adjusted basis. Investors should keep in mind that a stock split does nothing to make the intrinsic value of the stock more attractive. It just makes the shares more affordable.
