Tesla stock split isn't the only big catalyst for EV king, analyst says

Tesla’s three-for-one stock split that kicked in after the close of trading on Wednesday is just one of many catalysts driving the stock, crow Wall Street analysts.

“After brutal shutdowns in April/May due to the zero Covid policy, we are now seeing unprecedented Model Y production in China after factory upgrades with Musk & Co. on a pace to produce over 1 million vehicles annually out of this key product artery,” Wedbush analyst Dan Ives said in a note to clients on Thursday.

“Demand is not the problem for Tesla, but supply has been and is now clearly on an upward trajectory with China on its next level of Model Y production while Berlin and Austin ramp its production lines into year-end,” Ives added. “While the shaky macro will clearly trim some demand for Tesla (as well as the industry), we believe demand continues to hold up firm for the EV stalwart across the US, Europe, and China.”

The longtime Tesla bull reiterated an outperform rating on Tesla shares and lifted his price target to $360 from $333 as adjusted for the stock split.

Tesla stock fell slightly to $293 as of 2:27 p.m. ET on Thursday and was among the hottest tickers on the Yahoo Finance platform.

Another thing the Street is assessing is how a bullish maneuver from lawmakers will affect Tesla.

The Inflation Reduction Act’s new $7,500 tax credit for electric vehicles could be a major tailwind to Tesla stock and the company’s bottom line, CFRA analyst Garrett Nelson pointed out in a note of his own.

“The signing of the Inflation Reduction Act was the equivalent of ‘Christmas in August’ for Elon Musk & Co., as we peg Tesla as the biggest winner from the new law, as most versions of the industry’s two bestselling EVs (Tesla’s Model Y and Model 3) become eligible for the $7,500 federal EV tax credit effective January 1, 2023,” Nelson wrote. “Previously, all Tesla vehicles had phased out of tax credit eligibility after hitting the 200K units per manufacturer cap.”

A Tesla store for new energy electric vehicles is seen in Shanghai, China, on April 2, 2021. (CFOTO/Future Publishing via Getty Images)

Nelson — who also reiterated an outperform rating on the stock with a split-adjusted price target of $415 — also thinks the aforementioned stock split will serve as a bullish catalyst for Tesla.

“In our view, the stock split doesn’t change anything fundamentally — the impact is more psychological, as companies with improving prospects and rising stock prices tend to execute stock splits,” Nelson explained. “It’s worth mentioning that studies have shown that stocks that split tend to outperform the broader market in the 1-3 years following the split. A lower share price could also appeal to retail investors.”

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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