Tesla Inc (NASDAQ: TSLA) has had a fantastic run in recent weeks but shares could further rally and hit $1,600 over the next six to twelve months, says the Future Fund’s Gary Black.
Tesla could opt for a 10-for-1 stock split
Black expects the EV maker to execute a 10-for-1 stock split this summer. The last time Tesla diluted shares like that, it ended up with a subsequent 700% gain, he reminded.
It allows retail investors to get into the stock at a lower price. But it also allows employees to get in because it’s easier for management to give them shares as compensation.
A broader retail investor base, as per Black, will help Tesla keep above $100 a share following the stock split.
Tesla will be cheap at 50 times earnings
According to the portfolio manager, none of the other equities he holds has as many positive catalysts for 2022 as Tesla.
On top of stock split, he’s convinced the launch of the Berlin Gigafactory and the subsequent production ramp up will help boost the stock this year. A possible upgrade from S&P to “investment grade” credit rating is also on the cards, he added.
Tesla is expected to grow sales by over 50% in 2022 that Black says makes it a cheap stock at 50 times earnings – his forecast for 2023.
If a company can grow at 50%, but it trades at 50 times earnings, it’s not really that expensive. Apple trades at about 30 times earnings, but it’s only growing at 7.0%.