Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. The Motley Fool owns shares of and recommends Tesla. But the reality is that it's impossible to know how Tesla shares will trade leading up to (or after) the upcoming stock split. The prospect that Tesla might sell an additional 200,000 units in China each year, however, adds $40 to the “bull case” price target. Based on the way Tesla stock has traded since its stock split announcement earlier this month, investors may be tempted to think that buying the stock ahead of its split on Monday makes the most sense. He still doesn’t recommend the shares, however. The $340 spread is more than 100% of the current Tesla share price, about twice as much as the average bull-bear differential for stocks in the Video: Jim Cramer on how investors should value the stocks of Apple, Tesla (CNBC), How you can save $1 million for retirement, How much the most populous states pay mail carriers, Creepy ways your company can spy on you while you work from home, Major companies suspend social media advertising over online hate speech, This bookshop survived earthquakes and recessions. Each share, however, will represent one-fifth of the ownership in the electric-car maker that it did previously. In reality, all … Tesla is not a tech company and should not be valued like one. The new best-case scenario contemplates selling 100,000 pickup trucks a year. Why Investors Don't Have to Choose Fractional stock investing is a popular but misleading term. After all, shares have already risen 35% since the stock split was announced on Aug. 11. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*. But there is no rational reason for investors to bet on a stock simply because of a stock split, as a stock split does nothing to make Tesla shares more valuable. Wall Street prefers earnings to hype. “To be clear, we are not bullish on Tesla longer term,” wrote Jonas in a Friday research report. It is hard to come up with a scenario where Tesla's stock is fairly valued, thus we rate this an "avoid". Of course, some investors may be convinced that there will be a bump in demand for Tesla shares when they become more affordable after their split. Why you probably don't own Tesla stock in your retirement account Tesla stock is on fire. With all this in mind, investors should base any investment decision on their long-term expectations for Tesla's underlying business and the stock's current valuation relative to those views. The Street may have already priced in an expected boost to demand by bidding up shares, and some investors may be standing by ready to sell if the stock becomes overvalued based on their estimate of its underlying business value. Sure, recent exuberance in the market for Tesla shares has likely been driven, in part, by excitement about the upcoming stock split. Should you save for retirement or pay down debt? He isn’t willing—yet—to give the company full credit for a pickup truck that will be produced in 2021. S&P 500. The rest of Wall Street seems to agree. It is possible that Tesla's share price continues to, The Investment Community where "Cash Flow is King". Find out why Tesla is one of the 10 best stocks to buy now, Motley Fool co-founders Tom and David Gardner have spent more than a decade beating the market. It's simply impossible to know how Tesla shares will trade in the coming days. The Motley Fool recommends BMW. The average analyst price target increased—roughly—$40 a share after earnings were reported, according to FactSet. More importantly, some investors may be wondering whether it makes more sense to buy the growth stock before or after Tesla stock starts trading on a split-adjusted basis. Comparing Tesla to its closest peers, it becomes quite clear that Tesla is trading at a quite high valuation. We've detected you are on Internet Explorer. Take Friday morning. Wall Street prefers earnings to hype. Other analysts are willing to give the company some credit for the proposed truck, but they treat bits of news—things such as the launch of the Cybertruck—in very different ways. When you go to Tesla's investor relations site, the first sentence … Analysts’ price targets on After soaring 900% over the past 12 months, the automaker's valuation is becoming increasingly difficult to justify. That illustrates how hard it is for investors to use analysts’ price targets as a significant criteria for investing. His best-case scenario contemplates selling 450,000. But over the past three months, the stock has surged about 45%. Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. Daniel Sparks has no position in any of the stocks mentioned. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.
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