Amidst the current bear market, Tesla is among the many companies seeing its shares drop. However, the recent announcement of a Tesla stock split has some wondering if the automaker could be among the few to help the market recovery begin.
Despite the overall market being way down on the year so far, some think that the low points present an opportunity to buy shares of Tesla in preparation for when market conditions improve. Additionally, Tesla’s recently announced plans for an upcoming stock split, which some think could lead the tech and auto sectors back to a bull market in time, according to The Motley Fool.
At the time of this writing, the Nasdaq has dropped off by 26 percent this year and the S&P 500 index has dipped by around 16.8 percent year-to-date. Tesla, on the other hand, entered the year with its shares flying high and has since seen a drop of around 42.5 percent from its high point.
Still, the announcement of an upcoming stock split has garnered favor with many Tesla investors who are buying the dip in advance of the market turning around. The news also comes amidst the auto industry’s most significant shift in several decades, with some forecasts predicting EVs will become the majority of auto sales by 2050.
Elon Musk's car company led EV sales in the U.S. in 2021, taking a whopping 70 percent of the market share. Ultimately, it’s Tesla’s EVs and autonomous driving leadership position combined that investors believe can create such a high degree of potential for future growth.
EV demand could surpass $1 trillion by 2030 according to some analysts, although the market for autonomous vehicles is expected to exceed $2.1 trillion by 2030 across EVs and gas cars. Interestingly, the growing mainstream acceptance for EVs is also expected to feed into Tesla’s autonomous driving focus — which puts Tesla in an excellent position to capitalize on the two adjacent markets.
Tesla remains extremely profitable, though it wasn’t always, with the automaker delivering around 1.06 million cars in the last year for around $62.1 billion in revenue. In addition, Tesla’s automotive gross profit margin climbed to 32.9 percent in Q1 2022, from 26.5 percent in the same period in 2021.
A stock split has few real implications for the company’s stock, though it typically garners a welcome response from investors. Tesla’s diversifying of the business and its increasing revenue from scaling vehicle production, however, are likely to help the company survive a bear market, and an upcoming stock split could even encourage investors to buy the dip before the company’s shares become much more expensive.
Source: The Motley Fool