The news of Tesla (TSLA) laying the groundwork for its second stock split in two years has made analysts and investors optimistic, as shares rallied 8% higher on Monday following the news.
According to Wedbush Securities Managing Director Dan Ives, the EV maker is headed down the right path.
"Tesla right now is in a massive position of strength in terms of where they're heading from a manufacturing perspective, in terms of Berlin, as well as Austin and overall demand," Ives said on Yahoo Finance Live (video above), later adding: "They have that high-class problem of a four-digit stock. And I think it's something where you could always have the debate, but a stock split is a smart strategic move for Tesla, just like it was for Amazon, just like it was for Google, as well as for Apple."
A stock split would change the price per share of Tesla's stock but not the overall value of those holdings.
A recently Tesla regulatory filing showed the EV manufacture plans to request stockholder approval at its upcoming annual meeting to increase the number of authorized shares of common stock as a way to "enable a stock split."
In early August 2020, Tesla announced a five-for-one stock spilt that sent the share price to a record high of $2,000. Following the stock split, the price per share was reset to around $460.
Tesla shares dipped earlier this month after CEO Elon Musk tweeted that the company was facing inflationary pressures. The stock has since rebounded to over $1,000 per share.
"You don't buy it because of a stock split," Ives said. "You buy it because fundamentally where you think it's gonna go, but the stock split is gonna be something that is a catalyst. It's been rumored for the last four or five months. And I think it was smart to get out there."
