If you look up electric vehicle (EV) in the dictionary, there may as well be a picture of a Tesla (TSLA).
Stock splits, cutting-edge new manufacturing plants, higher gas prices and a very robust outlook mean investors need to seriously consider accumulating shares.
All EV roads currently lead to Tesla ... and big news recently dropped.
On Monday, the company, based in Austin, Texas, announced it would ask shareholders to vote on a stock split at the annual shareholders meeting in June.
Other giants recently announced stock splits. Alphabet (GOOGL) and Amazon.com (AMZN) shares got a big boost higher as investors clamored to buy in ahead of the share split.
The same thing could very well happen with Tesla.
Stock splits are one way corporate boards are stuffing their pockets … but for retail investors, new savvy strategies are coming about.
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Bears say that stock splits do not change the fundamentals of a business, and that investor enthusiasm is unwarranted. That philosophy is totally incorrect.
Share splits generally come after periods of exceptional financial performance. When a board of directors recommends splitting shares, it's a very positive sign that the near-term outlook remains exceptionally strong.
And it's not surprising at all that the Tesla split news comes only days after the opening of its latest cutting-edge factory near Berlin, Germany.
An even larger facility in Austin is set to open in April.
These so-called gigafactories are the evolution of Tesla's Giga Shanghai. The Chinese plant is the most efficient in the automotive world, churning out one new EV every 45 seconds. That's simply remarkable.
The manufacturing story at Tesla is primarily responsible for the recent run-up in share price.
The company reported in January that production during Q4 swelled to 305,840 units, an increase of 87% year over year.
For the full year, Tesla manufactured 930,422 units, up a staggering 83%. As Berlin and Austin ramp up production, these industry-leading EV numbers will only grow.
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The news is equally upbeat at Alphabet and Amazon.com. Executives at each firm announced earlier this year that growth was accelerating and future guidance would exceed analysts' forecasts.
I’ve written often about the digital transformation tailwind.
This big trend will move all the corporate world away from traditional analog business practices. Data is the new currency. Companies that become capable of harnessing information will win.
Others will go away, and existential threats tend to loosen corporate purse strings. The global pandemic and work-from-home trend was a wake-up call. It highlighted the importance of digital strategies.
It was easy to forget about the digital tailwind.
Too often, investors become distracted with geopolitics and macroeconomics.
They were told the war in Ukraine and rising interest rates would lead to prolonged shortages, higher commodity prices, stagflation and other scary once-in-a-generation economic calamity. Certainly, none of these issues have been resolved, yet stock prices are rising … not falling.
We’re all living in the digital transformation … and we're still in the early stages of takeoff.
Don't ever think otherwise.
Tesla is a clear digital transformation leader and currently looks to be in the best position to win the transition from lagging vehicles with internal combustion engines (ICE) to smart cars and trucks that are electrified.
Related Post: Why GM Isn’t Tesla
This process isn’t going to happen overnight. There will be turbulence along the way. The larger tailwind, however, isn’t in doubt. It’s happening.
At a price of $1,086.86, Tesla shares trade at around 84.5 times forward earnings and around 20.4 times sales.
Considering the stock split, the future of electric transportation and Tesla's leadership position, the stock still appears very attractive. Remember to do your own due diligence before buying anything.
Best wishes,
Jon D. Markman
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