Why Tesla (TSLA) Stock is Soaring Lately

Tesla (NASDAQ: TSLA) stock price rebounded sharply in March after it had suffered heavy losses in January and February. At the end of March, Tesla share price is still down nearly 9% YTD but trading at a much higher price compared to the 7-month low set in February.

Tesla Stock Split Planned For This Year

Tesla is planning a second stock split in two years, after announcing a five-for-one split in August 2020. The electric carmaker asked shareholders for a new stock split that would take the form of a dividend and pay Tesla’s investors additional shares. 

Tesla did not provide details about how many shares would shareholders receive if the new stock split is authorized. 

The automaker grappled with certain challenges at the start of 2022 but things have improved since it has received approval from the German government to deliver the first cars manufactured at its new gigafactory outside Berlin. 

The move comes after several tech giants announced stock splits, including Amazon and Alphabet, both of which declared 20-for-1 stock splits. 

Tesla also did not provide information about the timing of the planned stock split. The vote for the split should take place at the next Tesla shareholder meeting, which also doesn’t have an official date yet. 

While stock splits do not affect the value of the company, they typically reduce the price per share. As a result, the demand for the stock increases as it becomes more accessible.

For instance, when Tesla’s previous five-for-one stock split came into force, shares of the carmaker jumped by 12.6%. Since then, Tesla’s shares have more than doubled. 

“Given how well the stock has done since the last split, this wasn’t a surprise,” said Dan Ives, an analyst at Wedbush Securities.

On the other hand, the benefits of the stock split have been somewhat affected over the recent years as the majority of individual investors now prefer using apps like Robinhood or WealthSimple, which allow them to buy fractional shares of major stocks like Tesla. 

EV Production Ramp

Last week, Elon Musk’s electric vehicle maker officially opened its new Berlin gigafactory, two and a half years after the company announced its plan to build a new plant in that area. The factory, called Giga Berlin-Brandenburg, is located just outside Germany’s capital. 

As a part of the official opening, Tesla delivered the first vehicles produced at the new gigafactory, including thirty Model Y compact SUVs, which are normally priced at €63,990 ($71,230). 

A few weeks ago, German authorities provided a provisional approval to Tesla that allows the company to begin production at the new factory. The approval lets Tesla manufacture up to 500,000 vehicles per year at the plant. 

Tesla’s initial plan was to begin production last summer, however, multiple issues related to the coronavirus pandemic, chip crunch, and environmental concerns have forced the carmaker to postpone the opening. 

Two years ago, the German court forced Tesla to stop its preparations for the Giga Berlin-Brandenburg plant after local activists criticized the carmaker for impacting wildlife and water supplies. 

Musk and Tesla managed to ease the concerns, with the company’s CEO claiming the new plant will use “relatively little” water and that the forest that was cleared before the construction of the factory began was not natural. 

Last year, Tesla sent a letter to a German court, arguing that the country’s regulatory framework “directly contradicts the urgency to plan and realize such projects that are necessary to battle climate change.”

Summary

Tesla’s stock price rebounded in March after a strong selloff that started at the start of the year. Shares corrected nearly 40% before rebounding to trade above the $1,000 handle again. Tesla investors are likely to shift their focus toward the Q1 delivery update with Wall Street expecting the EV maker to deliver around 315,000 cars in the quarter to end-March.

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