- Tesla stock surges as stock split dividend announced.
- TSLA also benefits from the return of risk mentality.
- Tesla now targets $1,210 and then all-time highs.
Tesla stock (TSLA) soared on Monday as risk flowed back into virtually all sectors of the stock market. Reasons are complex and varied, but it seems the lack of conviction from the doom and gloom of early March is a causative factor. Positioning had become overly bearish in the wake of the Ukraine conflict as investors rushed headfirst into safe haven assets and dumped equities. The increasingly hawkish Fed then seemed to prove the doomsters right and they stretched those positions even further. However, markets began to normalize the conflict in Ukraine as initial fears over World War III abated. Then Fed Chair Powell spoke bullishly on the health of the US economy, and this sent stagflation theorists packing. Once the expected equity capitulation failed to materialize, positioning was wrong and needed to reverse. In stepped trend-following CTAs to push the embers of the rally ever higher, and this was then added to by buyback season and finally retail investors piling in.
Tesla Stock Split
Tesla's stock had already benefitted from this repositioning and retaking of some risk. Tesla itself stoked the fires even further on Monday, however, as it announced shareholders would be allowed a vote on a proposed stock split dividend. A stock split dividend is a clever way of paying a dividend to shareholders. Instead of using cash, shareholders receive extra shares for their investment. There is no effect on the balance sheet, but they can affect earnings per share as there are now more shares in issue. Tesla is of course no stranger to stock splits, having done one as recently as August 2020. That split saw a surge in performance for TSLA stock as well, but some of that can be put down to the general bullishness at the time.
Will it be the same this time around? Recent stock splits from fellow mega-caps GOOGL and AMZN have seen prices rise after the announcement. People just focus on price more than value. That is why Warren Buffet is notoriously against splitting his Berkshire Hathaway stocks, which trade at over $500,000. Though he did finally launch B shares.
While momentum will continue for some time leading up to this announcement (speculated to be in June) other factors will need to be watched closely. Risk appetites are currently back in positive territory, but if this changes then TSLA will struggle to stay positive in such a negative environment. For now though, risk sentiment is up, equities are strong and retail investors are positive about the stock split. After AMC and GME surged on Monday, Tesla was one of the top trending names on retail sites.
Tesla Stock Forecast
$1,210 is now firmly in sight, which remains the last obstacle before a push to all-time highs. Holding above $945 is the key to the medium-term bullish trend. Holding $1,000 is the short-term pivot.
Tesla (TSLA) chart, daily
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