After Amazon, Tesla Wants To Use This Optical Illusion

Tesla stock split

Since the beginning of June, the stock of e-commerce giant Amazon (AMZN) has plunged another -15%. This is even after many investors jumped in quickly because the price had visually cheapened. Tesla is getting ready to follow suit.

Tesla Plans Split of 3:1

In principle, a stock split does not change the valuation of a company. Now, however, Tesla (TSLA), like Amazon before it, wants to resort to this optical trick and make its share certificates a little smaller for small investors. 

The US company has announced a 3:1 split. The price then divides by three and the number of shares triples. However, this will hardly improve Tesla’s chart condition. 

Share Valued at P/E Ratio of 54 Despite Correction

tsla split

What we’re currently witnessing on the stock markets is the unwinding of historically high valuations. As you can see from the chart above, Tesla has also corrected sharply. 

True, the stock is no longer valued at a P/E ratio of over 100, as it was last year. However, a P/E of 54 based on this year’s earnings estimate can’t be called a bargain either.

Analysts Ignore High Valuation

Some analysts, however, see things differently. According to the Wall Street Journal, 27 of 44 analysts recommend buying or topping up Tesla, 12 advise holding and five analysts want to sell. 

Incidentally, the average analyst price target is $968. That would put the P/E ratio at over 80. Daimler, by the way, has a P/E ratio of 6.

In conclusion, Tesla has lost its unique selling proposition as an EV manufacturer. Every car brand now builds vehicles with electric drives. The German premium brands in particular are now taking off. In contrast, Tesla’s stock is still absurdly highly valued.

Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.
Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.

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