Should Tesla Stock Split in 2017?
Tesla stock bears are living a nightmare. Every morning they wake up to see Tesla Inc (NASDAQ:TSLA) stock crossing a new price milestone. It’s a joyride many of us yearn to take now, but regret having missed the early chance. But don’t cry, my friends, for the milk is not spilled yet! A Tesla stock split in 2017 could surely give us a second chance at TSLA stock.
Granted, we don’t yet have a Tesla stock split date in 2017, but the possibility could be there on the table. How else will Elon Musk make us a part of his Master Plan, Part Deux?
You see, Mr. Musk, a $300.00 price tag is a little too much for average retail investors, who can’t compare their humble savings with high net-worth investors and money managers. So carving out a significant TSLA position in their portfolios is only possible if the stock is made cheaper to buy.
My point is that a cheaper TSLA stock price opens the floodgates for a whole new class of retail investors. I’m particularly eyeing one segment of the investor community: those who strictly practice “Socially Responsible Investing,” or “SRI.” Yes, it is actually a thing. But it’s nothing new, for I personally know quite a few people who have long engaged in SRI.
Case in point; there are people out there who prefer to invest in companies working for society’s greater good. Argue all you want, but Musk’s master plan of achieving a greener future through Tesla makes TSLA stock a perfect fit for this genre of socially responsible investments.
But for many, TSLA stock could only become a part of their portfolios if Tesla stock splits for, at least, 3-for-1. Why 3-for-1, you ask? Because the price will get slashed by one-third, making $100.00 apiece a much reasonable price point for these investors.
By the way, if all this commentary on stock splits is gibberish to you, here’s a quick crash course on the concept.
Answer me; how do you divide a pie equally between four people? Well, it depends on how you slice it. If you slice it into four equal pieces, everyone gets one slice. If you slice it into eight equal pieces, everyone gets two slices. But under both circumstances, each of the four people gets a quarter of the pie.
So either way, everyone ends up with the same share of the whole pie. However, in the latter case, each person gets the option to keep one slice and give the other away. That way, the pie can be shared with more than four people. Makes sense?
Stock splits work precisely on the same lines. Let’s say you own 10 Tesla stocks for a price of $300.00 each. Say the company goes for a 3-for-1 split. Then you get three stocks in exchange for each Tesla stock you own, for a total of 30 stocks (3×10=30), but the price of the stock is cut by one-third to $100.00, so the value of your stake stays the same at $3,000.
|# of Stocks Owned||Price of Stock||Total Investment Value|
|Post- 3-for-1 Split||30||$100.00||$3,000|
So you get the same share in the pie, no matter how many slices you cut. But just like my pie analogy, Tesla stock can now reach more investors. In short, the stock has added liquidity after a split.
Why Tesla Stock Split in 2017 Is a Good Idea
You see, when Tesla Motors married SolarCity Corp (NASDAQ:SCTY) and gave birth to Tesla Inc, we witnessed the union of two distinct stocks—the stock of an automaker and the stock of a solar utility. The offspring born out of it is a solar technology stock with the genetic traits of both its parents.
If you look at the TSLA stock chart, it’s evident that the old stock roughly traded within its historically established support and resistance levels. But following the SolarCity acquisition, Tesla stock breached that resistance to hit new highs.
Chart courtesy of StockCharts.com
Simply put, it didn’t take long for the market to see that this new TSLA stock had a combined value of its two parents. This is exactly why a stock split is needed to unlock that value and make it the equivalent of one.
But wait, there is another reason to call for a Tesla stock split in 2017.
Like I said before, a cheaper stock price will open the doors for retail investors who previously missed the boat. The added liquidity that’ll follow the stock split will allow hordes of new investors to become party to Elon Musk’s green revolution. Naturally, with more investors coming in, the Tesla stock price will take a steady stride northward.
This, by the way, is no speculation. There is empirical evidence of split stocks performing better than most other stocks, particularly in the first year following the split. In fact, if you just rewind back to 2014 and recall Apple Inc.’s (NASDAQ:AAPL) 7-for-1 split, you’ll find evidence right there. When Apple gave away seven stocks for one, investors rushed in droves to get their hands on AAPL stock, and consequently, the stock price shot up.
So, although we don’t yet have anything on the Tesla stock split history, there’s always a first time, and now could be that time.
TSLA Stock Prediction 2017
Tesla is firing on all cylinders right now and naysayers may hate to hear this, but I don’t see this company running out of steam any time soon. Limited production for the “Model 3” is beginning in two months, after which the company plans to ramp up production to 5000 vehicles per week by end of this year.
Alright, alright, I know that the Tesla Chief is infamous for his wild targets that he’s usually late on delivering. But let’s be honest, if he does deliver later and not sooner, that still makes him a man of his word.
As for his Master Plan, Part Deux, Musk is right on track to achieving the four big goals he has laid out in his agenda.
|Create solar roof tiles integrated with Powerwall||Check!|
|Build an EV for all market segments—SUVs, compact mass cars, semi trucks, heavy trucks||On it!|
|Make Tesla’s Autopilot 10x safer than manual driving||On it!|
|Create an autonomous Tesla ride-sharing network||Getting there!|
So, it’s safe to assume that Tesla stock will get a big push up the ladder every time the market will check an item on this list.
Tesla has just showcased the first-of-their-kind, aesthetically appealing, solar roof tiles that harness the power of the sun, then store it in Tesla’s “Powerwall” battery, and finally deliver electricity to power a house. It’s a stunning invention!
Next, after having successfully launched the Tesla SUV (the “Model X”), Tesla is now on to the mass market car—the Model 3, which hits the market this year. But this isn’t the end, it’s the beginning. That’s because Elon Musk has hinted on revealing a Tesla semi-truck this year, following which the company will move to other consumer segments for electric vehicles (EVs).
Then, Tesla’s autonomous driving assistance system (ADAS), called the Tesla “Autopilot,” which is already a top-notch technology, is constantly undergoing an overhaul to be made the best of all ADAS technologies out there.
Once it has achieved perfection, Musk’s final plan of an autonomous ride-sharing Tesla service will kick in. Think of it like an Uber clone, minus the driver. People will be able to hail self-driving Tesla cars for drop-offs, and Tesla owners will make rental money off of their cars without moving a limb.
Musk imagines this to be the time when the majority wouldn’t want to own a car, and those who will, will buy the green and sustainable Tesla cars.
Does all this sound too good to be true? Don’t overthink it, because it’s very much possible. We’re talking about the man who built from the ground up an extremely capital-intensive business of auto-manufacturing, with merely a modest sum of money out of his own pocket. Today, Tesla is a reality even the hardcore haters can’t deny.
It’s obvious that Tesla has way more room to grow in the coming years. This can only mean one thing; that Tesla stock will go further out of reach of average investors, like you and me. So here’s to hoping that Musk will hear our woes and go for a Tesla stock split in 2017.