Tesla’s second stock split in two years is ‘a high-class problem of a four-digit stock’: analyst

Wedbush Securities Managing Director Dan Ives joins Yahoo Finance Live to discuss Tesla's stock split and what it means for the EV maker.

Video transcript

- We're shifting gears now to look at this year's annual Tesla shareholders meeting, which will include a vote to offer additional shares in order to facilitate a stock split, which would be the second within the past three years. Well, here to help us go deeper into that decision is Wedbush Managing Director Dan Ives. So Dan, what are your thoughts on the timing of this, announcement, especially given Tesla's recent expansion with its German manufacturing plant, as well as trying to double down in China?

DAN IVES: Look, I mean, Tesla, right now is in a massive position of strength in terms of where they're heading, you know, from a manufacturing perspective, in terms of Berlin, as well as Austin, and overall demand. So I think the fact that this is the second stock split in two years, it just shows that they're in that massive position of strength. They have that high-class problem of a four-digit stock. And I think it's something where, you know-- I mean, you could always have the debate. But a stock split is a smart strategic move for Tesla just like it was for Amazon, just like it was for Google, as well as for Apple as well.

- Is this an anticipated shareholder vote or split that you would be buying further into, Dan?

DAN IVES: Look, I mean, it's one of those-- fundamentally, it's why you buy Tesla. And I think fundamentally that's something that continues to sort of move higher based on where we see demand, as well as now the manufacturing footprint, where supply is no longer gonna be an issue. And they could ultimately double units year over year going to 2022 despite obviously some of the issues that you're seeing in China and some of the COVID issues.

But look, retail, you know, obviously likes stock splits. And I think Tesla, you know, there's always going to be a debate. But the stock splits is something where they believe as the stock continues to get higher, they're going to continue to go down this path. And it's hard to argue with the last one where the stock's up about 3x since that in August 2020.

- And history certainly seemed to be on Tesla's side with the stocks. But I mean, companies have outperformed the S&P 500 after stock splits, and that margin goes wider by the time they hit the 12-month mark. Do you think that will be the case for Tesla given some of the headwinds, as you mentioned, things like tight supply, chip shortages, as well as the COVID outbreaks in Shanghai that have halted production for now?

DAN IVES: Look, I think in EV, it's an arms race. And I think there's perception where more and more competition, that's a negative for Tesla, which we disagree with. I think what you're actually starting to see is more and more adoption, especially in Europe. You look at gas prices, what we're seeing sort of globally. I mean, this is going to be a major catalyst for Tesla.

I think ultimately EV demand could accelerate by two years in terms of what we're seeing with $6, $7 gasoline, and especially what we're seeing in Europe. And I think they're further flexing their muscles from a manufacturing perspective. You don't buy it because of the stock split. You buy it because fundamentally where you think it's going to go.

But the stock's split is going to be something that is a catalyst. It's been rumored for-- let's call it-- the last four or five months. And I think it was smart to sort of get it out there so at least to investors, it's transparent in terms of which way they're heading.

- Dan, the timing of this announcement what does that tell you about what Tesla is seeing in terms of demand, especially with Giga Berlin finally opening up?

DAN IVES: It's bullish, I think from a [INAUDIBLE] perspective. I mean, a company that's going to do their second split in two years is not doing it because they're in a position of weakness. I think it shows a position of strength, confidence. I think we go into one Q, you're going to see more and more momentum essentially from a manufacturing perspective. You got the April 7 barbecue in Austin, where that cuts the ribbon there. And despite all the noise, despite all the competition, I mean, right now Tesla, at least in EV land, it's really Tesla's world and everyone else paying rent.

- So then to that point, then, Dan, how much further does this move put Tesla ahead of some of these other EV rivals not just in the US, but also in China as well?

DAN IVES: I mean, in China specifically, like Neo Xpeng, Li Auto, and others, you know, phenomenal technology. I think the issue that Tesla has is the manufacturing footprint. I mean, Giga Shanghai is really going to be upwards of a million [INAUDIBLE] per year. So they have significant brand, significant manufacturing capability, and, of course, battery technology.

When you look globally, I mean, many companies, they're just trying to get off the ground. Yet Tesla just continues to further flex their muscles. It's similar to what we see with Apple, right, where many are basically not introducing new products, cutting production because of supply. You look at Apple, they continue to introduce new products.

- OK. So since you mentioned Apple, let's stay there for a hot second and the production cuts that have been reported by Nikkei, as you mentioned there a moment ago. You know, what should we extrapolate from that? We've been breaking down the timing and what this means for perhaps the cycle and where we find ourselves. Is this something that may permeate into other Apple devices?

DAN IVES: I mean, look, overall demand is robust for iPhone 13. That's the most important. When you look at iPhone SE, the headline is a lot scarier than the reality. I mean, we're talking some cuts around the edges. That's typical for a low-end phone for Apple.

And I think this is one. Like, the haters will always make a mountain from-- a molehill into a mountain. But the reality is Apple has mastered position of strength. And then you look not just on the product cycle, but you look what's happened on the services side. I mean, first streaming company to ever win an Oscar for Best Picture not Amazon or Netflix. It's that company in Cupertino. And that's why the major feather in the cap last night despite obviously the "Fight Club" moment which took away, I think, a lot of the focus on the Academy.