The surge of Tesla stock seems unstoppable. It achieved its all-time-high once again, reaching its 2000 price level. The company now has over $350 billion market cap, making Elon Musk, who owns around 20% of Tesla, the fourth richest person in the world.
Tesla shares climbed to the moon after its stock split announcement. Apple announced its stock split before Tesla, and its stock has been bullish after that. Then, it became the first US company to reach 2 trillion market cap. Will Tesla reach its trillion-market cap this year?
Tesla Stock Split Highlights:
- On August 31, Tesla will split its stock 5 to 1
- Meaning, for every TSLA share held, an investor will receive 4 additional shares in the form of dividends
- Each will be valued at a fifth of the price
What is a Stock Split?
A stock split happens when a company decides to divide the existing shares of its stock to decrease the market price of individual shares. That way, the number of shares outstanding (shares sold to investors) will increase and could enhance liquidity.
Why Tesla and Apple are doing stock Splits?
Since a stock split reduces the price per share of a given stock, it becomes more affordable for investors. Tesla reported in a statement that the split is intended to “make stock ownership more accessible to employees and investors.”
Tesla stock reached its 2,000 price level, and it looks so expensive for many investors. Not every investor has $2,000 to buy one share of TSLA. Many analysts also consider the stock to be overvalued. After the 5 to 1 split, TSLA stock price could lower down to approximately 400 per share.
Unlike Tesla, Apple’s stock split will be its fifth time in its history. Its market cap is now worth $2 trillion. Many investors are still bullish and going long for AAPL. The stock is one of the top tech stocks in the S&P 500, NASDAQ 100, and Dow Jones.
Is it better to Buy a Stock Before or After a Stock Split?
Although a stock split makes the stock price cheaper, it doesn’t change the market value of the company. Nobody can ever tell the exact effect of the split to the company’s stock price. However, according to Bespoke Investment Group, between 2015–2020, stocks of companies that announced splits, gained an average of 2.3% between the time they announced the split and the time it took place.
5 Reasons Why You Should Invest in Tesla Stock After the Stock Split
1. Solid Fan base
You love them, you hate them, but Tesla has an incredible fan base, especially individual investors. Approximately 563,000 users are holding the stock on the popular app Robinhood, according to Robintrack.
As of August 21, 2020, there are over 3.6 million Tesla followers on eToro, a popular social trading platform. 14.83% of them are investors, and 94% of them have buy positions of TSLA.
In terms of customer satisfaction, Tesla owners are brand believers. The electric car company tops the list of J.D. Power, a global market research company’s latest 2020 APEAL Study. The study measures owner’s emotional attachment and level of excitement with their new car.
2. Tesla Could Join the S&P 500
The affordable price of TSLA after the stock split could attract more investors on board and could spike its market cap to new highs Tesla is now one of the top stocks on the NASDAQ 100 index and is now also eligible to join the S&P 500. Being listed in an index could boost TSLA stock price because many pooled investment houses like ETFs track stock market index.
3. Attractive Price
Splitting the current price of Tesla stock in five will make it back to the 400 level. Although it doesn’t change the market value of Tesla, more individual investors can afford to buy more shares now. Many who claims to have missed the below-400 level will now the chance to invest.
4. First Mover of Electric Cars
Tesla is often referred to as the iPhone of Electric Car Makers. It is now bigger than Volkswagen, Ford, BMW, Ferrari, General Motors, and Hyundai combined in terms of market capitalization.
It delivered a total of 179,050 cars worldwide for the first half of the year 2020. Despite the covid19 pandemic, Tesla targets to deliver 500,000 units in this entire year 2020. Hitting that goal could cause a rise in its stock.
5. Accelerating Growth
Tesla is not only an electric car company. It also produces solar power systems and battery charging equipment. The company is expanding its manufacturing power to reach global markets. It has gigafactories in Nevada, New York, Shanghai, Berlin, and planning to add another one in the central United States for its Cybertruck Gigafactory.
How to Buy Shares of Tesla Stocks for as Low as $50?
Some online trading brokers offer fractional shares (you can buy TSLA with $50 regardless of its stock price). That is very affordable and helpful for small investors.
We use eToro to buy the underlying asset for as low as $50 without paying any commission fee.
Note from the author: I wrote this article myself, and it expresses my own opinion. This content is for information purposes only and should never be considered as professional advice. Every investor has a different risk tolerance and goal. Always do your own research. All investments have risks. Risk only the money you’re not afraid to lose.