Tesla Inc (NASDAQ:TSLA) shares began trading after a 3-for-1 stock split today designed to make the electric vehicle automaker's shares more affordable for investors but it has not changed the opinion of some bearish analysts.
On an adjusted basis, Tesla shareholders will get two additional shares for every one they owned as of August 17, 2022.
Tesla shares were trading at $295.19 in early deals on Thursday, having closed at a split-adjusted US$296.453 overnight, adjusted from their pre-split price of US$889.36.
This comes two years after the company carried out a 5-for-1 stock split, after which its share price rose nearly 43.5% to June 6, 2022.
The EV company's shares are extremely popular on both sides of the Atlantic, and are often among the most-bought stocks by retail investors on UK investment platforms.
To reflect the stock split and improved production in China after recent lockdowns, broker Wedbush has set a 12-month price target of US$360.
"We are adjusting our pre-split US$1,000 price target (US$333 post-split) to US$360 reflecting the 3:1 split as well as improved production from Tesla out of its key China Giga factory during the September quarter with clear momentum heading into year-end," Wedbush said in a note.
With factory upgrades, Musk is now producing over 1mln Model Ys annually from this key product artery after brutal shutdowns in April/May.
"Demand is not the problem for Tesla, but supply has been and is now clearly on an upward trajectory with China on its next level of Model Y production while Berlin and Austin ramp its production lines into year-end."
In the EV race, the broker reckons Tesla's massive production capacity and potential for 2mln deliveries will give it a significant advantage.
And though the shaky macro will reduce demand for Tesla and the industry, Wedbush believes the EV stalwart will continue to hold up well across US, Europe and China.
Analysts at Bernstein said the company is a clear winner from the Inflation Reduction Act, also known as the climate change act and other names, signed by President Biden last week and immediately implemented.
However, Bernstein said Tesla's market valuation remains far too high.
"TSLA’s valuation is higher than all other major automakers combined, and appears to imply huge volume and industry-leading profitability going forward, which is historically unprecedented," analysts said.
"We believe risk/reward at current levels is not attractive for longer-term investors."
Stock split
Investors love stock splits because it helps them add more shares to their portfolios.
Elon Musk's Tesla stock has attracted a high level of interest from retail investors, and the stock split makes it easier for them to invest.
"Companies largely think a share split helps liquidity in their shares, in the view that a big share price can be a deterrent to private investors. Amazon carried out a 20-for-1 split for exactly this reason in the summer," said AJ Bell investment director, Russ Mould.
Terming a split "just a cosmetic exercise and one that in no way changes the fundamentals of the company, or the investment case for it," Mould said the core of the investment case still rests "on the competitive position of the company, its financial strength, management acumen and then valuation. Not one of those changes in the case of a stock split."
Since there are more shares, they are theoretically more liquid and easier to trade, but this does not necessarily make the firm a better investment, added Mould.
Tesla's share price has risen 14% in the past month and 41% in the past three months, after hitting lows in June, heading back towards quadruple digits.
As such, said Victoria Scholar, head of investment at Interactive Investor, "now seems like as good a time as any to reduce the price of a Tesla share by roughly 66%, broadening the stock's accessibility to a wider pool of smaller investors".
"Investors continue to be drawn to Tesla thanks to its well-deserved place at the centre of the shift towards climate-friendly technologies and the mega trend away from petrol and diesel vehicles towards electric cars, instead," she said.
"Although this is a constant tug-of-war between the bulls and the bears, as a divisive stock with a CEO who is no stranger to controversy, most analysts on Wall Street are optimistic on Tesla with a majority of buy recommendations on the stock."
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