Experts React To Tesla Stock Split, Trading Action: 'Kind Of Ridiculous'

Tesla Inc TSLA shares are up 6% on Wednesday after the company announced a 5-for-1 stock split on Tuesday afternoon. The stock split will be implemented after the market close Aug. 31.

Companies with relatively high stock prices like Tesla often implement stock splits to bring their share prices back down to a level that is more affordable for smaller, retail investors.

No Value Creation: Tesla’s morning rally added $18 billion to the company’s market cap despite creating no actual value.

“The math of it obviously does not create any value. But people think it creates value, so therefore it does,” CNBC’s Karen Finerman said on Tuesday afternoon. “It’s kind of ridiculous, especially since we’ve seen you can do partial shares now, you can do trading with little or no cost commissions now.”

Guy Adami said he agreed with Finerman’s take.

“The absurdity of it speaks volumes as to what’s going on. I’m going to get atted for this, but I think for a lot of people, they’d rather be long five shares of a $200 stock as opposed to one share of a $1,000 stock. There’s an absurdity to that that I can’t explain, but I think that’s just human nature,” Adami said.

Wall Street analysts also weighed in on Tesla’s split and the subsequent price action.

Insatiable Demand: Baird analyst Ben Kallo said investors simply have an appetite for technology stocks with exposure to transportation, renewable energy and software.

"We believe the stock split is a recognition of the fact that the market is increasingly influenced by individual investors, including those looking to gain exposure to next-generation transportation," Kallo wrote.

Wedbush analyst Daniel Ives said the stock split was a smart move by Tesla and that the company’s China business is firing on all cylinders.

“Tesla is following the lead of Apple and ultimately we expect more tech giants to potentially head down this path over the coming months as the parabolic rally in tech/EV names over the past five months has put companies in a position of strength to make such moves,” Ives wrote.

Morningstar analyst David Whiston said Tesla’s share price should theoretically not rise on the split news, but the stock has been on fire since CEO Elon Musk tweeted that Tesla’s share price was too high back on May 1.

“The stock opened at $755 that day and has more than doubled since then before coming back down in recent days, a downward trend the split news will now likely conveniently stop,” Whiston wrote.

TSLA Ratings And Price Targets:

  • Baird has a Neutral rating and $1,658 target
  • Wedbush has a Neutral rating and $1,800 target.
  • Morningstar has a Sell rating and $751 fair value estimate.
  • Tesla's stock traded around $1,471.45 per share at time of publication.

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Posted In: BairdBen KalloDaniel IvesDavid WhistonGuy AdamiKaren FinermanmorningstarWedbushAnalyst ColorNewsPrice TargetStock SplitTop StoriesAnalyst Ratings