Shares of Tesla (TSLA 0.78%) jumped Wednesday on the final day of trading before the company’s latest stock split takes effect. The stock rose as much as 2.5% today, and still traded up 1.9% as of 12:15 p.m. ET.
Investors might be looking back on the stock’s returns since its last stock split in August 2020. Since that 5-for-1 split, Tesla shares have returned more than 80%, compared to under 20% for the S&P 500 index.
Although there is no fundamental change in a business or its valuation from stock splits, investors usually view them as a positive sign from the company. Tesla’s upcoming split is no exception, with the resulting lower price per share potentially attracting new retail investors. Although shares are down about 15% year to date, those investors still see plenty to like in the company’s future.
Tesla and its investors expect to see the company increase vehicle production at an annual rate of about 50% for the next several years. Its two new factories in Austin, Texas, and near Berlin will help that in the near term. CEO Elon Musk said earlier this month at the company’s annual shareholder meeting that he believes a total of 10 to 12 plants will eventually help it produce 20 million EVs annually.
The recently passed Inflation Reduction Act should also help by giving consumers tax credits to purchase EVs, with some limitations. While not all of Tesla vehicles will qualify, any new incentives will be an additional tailwind for the company.
Investors might be focused on the upcoming stock split today, but the business itself still looks to have a long runway for growth. You just need to realize that with the stock up more than 2,000% in the last three years, some of that growth is already built into the share price.