Tesla woos retail investors with stock split, stocks standing

By Aakash B and Akanksha Rana

(Reuters) – Wall Street analysts praise Tesla Inc’s move to divide its richly valued stock into smaller shares, saying it had the potential this year to extend a 200% rally in its shares by making it easier for retail investors to hold the stock.

Shares in the electric carmaker rose more than 6% in early trading. The stock, which traded at around $ 1,467 for the clock on Wednesday, is one of the highest prices on Wall Street.

The split-for-one split – Tesla’s first – comes at a time when analysts and investors are worried about the high valuation of the stock in the market, despite concerns about cash burn.

“The move makes sense for Tesla because it makes its shares cheaper and more accessible for young first-time retailers using platforms like Robinhood,” said Jesse Cohen, senior analyst at Investing.com.

“While stock distributions are typically non-events for investors, the reaction seen in Tesla’s stock after the announcement underscores the growing demand from Robinhood retail traders to respond to fast-growing techs.”

Tesla’s move follows a split-by-one split announced by Apple Inc. end of July splits the first stock of the iPhone maker since 2014.

“We believe institutional investors turned the corner in a positive direction, as Musk & Co. not only talked the conversation through, but walked around its Model 3 sales and profitability track last year despite COVID,” said Wedbush analyst Dan Ives.

The world’s most valuable automaker posted stellar quarterly results last month, set to be included in the S&P 500 index <.SPX>.

Twelve of 33 analysts who rated the stock rated it “sell” or lower, and just eight rated it “buy” or higher. The median price target for the stock is $ 1,300, up from $ 615 in May.

(Report by Aakash Jagadeesh Babu and Akanksha Rana in Bengaluru, written by Subrat Patnaik; Edited by Maju Samuel)