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Tesla's Stock Split Explained

Split, which has just taken place, won't affect Morningstar's view on the company, which senior equity analyst Seth Goldstein values at US$760 per share.

Jakir Hossain 25 August, 2022 | 9:34AM
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Tesla (TSLA) shares are set to split for the second time in the past two years. The electric vehicle maker had been proposing a possible split since early this year, which was approved by shareholders during the company's annual meeting on August 4, 2022.

The shares are to be split on a 3-for-1 basis, meaning investors will receive an additional two shares for each one they already own. The company's last stock split was on a 5-for-1 basis in August 2020.

The Tesla stock split took place after the market's close on August 24. 

The split won't affect Morningstar's view on the company, which senior equity analyst Seth Goldstein values at $760 per share. After the split, the company's fair value estimate will be adjusted to about $255 per share to account for the increase in the company's outstanding share count, according to Goldstein.

The company's Morningstar Economic Moat Rating of narrow, which means it has a competitive advantage versus their rivals, will be unaffected by the split.

Tesla's stock will also keep a Morningstar Rating of 3 stars following the split, but at a slight premium of 14% as of August 23, which is still within a range that Goldstein views as fairly valued.

The company's shares rallied in the past few weeks on news that an agreement was reached to pass the Inflation Reduction Act, which was signed into law by President Joe Biden on August 16.

"Tesla could work with suppliers to incentivize the buildout of processing plants in the U.S., but this would likely take years before the company could secure enough battery materials for the majority of its vehicles to qualify,'' Goldstein says.

Other Stock Splits

Tesla is one of several tech and consumer companies that have set out to split their shares this year. Market leaders Amazon.com (AMZN) and Alphabet (GOOG) (GOOGLhave already split their shares in the past few months. Cybersecurity firm Palo Alto Networks (PANW) will split its stock on September 14 on a 3-for-1 basis.

 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Alphabet Inc Class A97.50 USD-0.68Rating
Alphabet Inc Class C98.09 USD-0.73Rating
Amazon.com Inc114.41 USD-0.64Rating
Palo Alto Networks Inc163.66 USD0.30Rating
Tesla Inc282.94 USD2.51Rating

About Author

Jakir Hossain  Data Journalist for Morningstar

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