Tesla 's plannedstock split shows it is in a position of strength and may be a catalyst to buy,Dan Ives said.- The EV maker will ask shareholders for approval for the split, so that it can pay a dividend using shares.
Tesla's planned stock split is a show of strength by the electric-vehicle maker that is likely to prompt investors to buy, according to Wedbush analyst Dan Ives.
On Monday, Tesla said it will ask shareholders for their approval to split its stock, so that it can pay a dividend using shares. The move echoes the 5-to-1 stock split it carried out in August 2020.
"A company that's going to do their second split in two years is not doing it because they're in a position of weakness. I think it shows a position of strength, confidence," Ives told Yahoo Finance Tuesday.
While investors will still decide whether to buy a company's stock by assessing its business, a split can give them a reason to jump in, he suggested.
"You don't buy it because of the stock split. You buy it because fundamentally, where you think it's going to go. But the stock split is going to be something that is a catalyst," Ives said.
"I think it was smart to get it out there, so at least to investors it's transparent which way they're headed."
The Wedbush analyst noted that Tesla surged following the last split, which made the stock accessible to a greater number of people by bringing down its price. The Elon Musk-led EV maker's current market value is more than $1 trillion.
"Retail obviously likes stock splits. I think Tesla, there's always going to be a debate. But a stock split is something where they believe, as the stock continues to get higher, they're going to go down this path," he said.
Tesla shares shot up to their highest price in more than two months, $1,079.77, on Monday after the stock split filing, but later lost ground. At last check Wednesday, they were changing hands at $1,110.50, up about 1% on the previous close.
Ives is bullish on Tesla, noting the rise in energy prices prompted by the Ukraine crisis should be a major catalyst for the company and could lead to greater EV adoption in Europe. It's also in a very strong position from a manufacturing perspective, he believes.
"Right now, at least in EV land, it's really Tesla's world and everyone else is paying rent," he said.
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