Tesla Stock Is Rising Ahead of Its Stock Split

What happened

Shares of electric car maker Tesla (TSLA 2.78%) were trading sharply higher on Tuesday. The growth stock rose as much as 2.4%. While the stock lost some of these gains later in the day, shares were still up nearly 2% as of 12:50 p.m. ET.

The stock’s gain is likely due to trading bets and hype surrounding the company’s planned stock split this week. Tesla shares are splitting on a 3-for-1 basis. The stock will start trading on a split-adjusted basis on Thursday, Aug. 25.

So what

Tesla stock has had a rough year, sliding about 16% year to date. But the stock’s year-to-date return would have been much worse if it wasn’t for a sharp recovery over the last three months. During this period, the stock is up more than 30%. This compares to a 6% gain for the S&P 500.

While the stock’s move higher on Tuesday may be due in part to traders making bets on the stock in anticipation of a potential bump higher this week as the company executes its stock split, part of the optimism may also be a continuation of Tesla’s upward trend over the last three months.

Now what

Whatever the main reasons for the stock’s nice uptick on Tuesday, investors should stay focused on the electric car maker’s fundamentals. After all, it’s impossible to know how the stock will trade throughout the week as Tesla shares are split anyway.

Tesla’s second-quarter vehicle deliveries fell sequentially as the company dealt with the ramifications of Shanghai government restrictions on factories in the region as the Chinese market implemented strict procedures to stop the spread of COVID-19. But despite a sequential decline, deliveries still grew 27% year over year in Q2. Even more, management said it finished up the quarter with strong production rates, setting up the company for higher production levels in Q3 and potentially even a higher year-over-year growth rate in deliveries. 

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

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