Tesla has given investors something to look forward to this coming week: a three-for-one stock split. As of the close of trading on Aug. 24, Tesla shareholders will get a “dividend” of two extra shares. The next day, Tesla stock will start trading at the new price—a third of what it used to be.
That may amount to little more than cutting the pizza into more slices, but individual investors often chow down on bite-sized pie. One study found that stocks announcing splits typically beat the market by 16 percentage points over the next 12 months.
The allure is clear: Tesla’s shares, recently $860, will now carry a price tag closer to $285, no small difference for retail investors.
Small investors matter for Tesla. About 46% of shares available for trading are held by noninstitutional investors. The comparable number for, say, Alphabet is 15%.
What’s more, stock splits can signal management’s optimism about the future. No company splits a stock that it expects to go down.
The last time Tesla split its stock—five for one back in August 2020—shares rose an incredible 81% from the announcement to the share trading on a new split-adjusted basis.
It’s hard to see that repeating. For starters, investors have known about this split for months, and the shares have risen almost 25% over the past month and 40% since their May 52-week low.
Still, with Tesla stock, investors can never be sure what will happen next.
Next Week
Monday 8/15
The National Association of Home Builders releases its Housing Market Index for August. Consensus estimate is for a 53 reading, slightly less than July’s 55. Not only has the index declined every month this year, but July’s 12-point drop also was the second steepest in the index’s history. Home builders say that affordability, production bottlenecks, and rising inflation are market headwinds.
The Federal Reserve Bank of New York releases its Empire State Manufacturing Survey for August. Expectations are for a five reading, six points fewer than in July.
Tuesday 8/16
Walmart reports second-quarter fiscal-2023 results. The company’s shares fell 11.4% after its previous earnings report in May, when it slashed profit forecasts. It was the largest single-day decline for the stock since October 1987.
Agilent Technologies and Home Depot report quarterly results.
The Census Bureau reports new residential data for July. Economists forecast a seasonally adjusted annual rate of 1.53 million new housing starts, about 30,000 fewer than in June. Housing starts have dropped about 10% from the beginning of the year.
Wednesday 8/17
Amcor , Analog Devices , Bath & Body Works , Cisco Systems , Keysight Technologies , Lowe’s, Synposys, Target, and TJX Cos. release earnings.
The Federal Open Market Committee releases minutes from its late July monetary-policy meeting. The FOMC raised the federal-funds rate by 75 basis points, to 2.25%-2.5%, at that meeting.
The Census Bureau reports retail sales data for July. Consumer spending is expected to increase 0.2% month over month. Excluding autos, retail sales are seen as being flat. This compares with a 1% jump for both measures in June. The consumer has proved resilient despite four-decade-high inflation, bolstered by a historically strong jobs market.
Thursday 8/18
Applied Materials , Estée Lauder , Ross Stores , and Tapestry hold conference calls to discuss quarterly results.
The Conference Board releases its Leading Economic Index for July. Consensus estimate is for a 0.3% month-over-month decline, after a 0.8% drop in June. “The US LEI declined for a fourth consecutive month, suggesting economic growth is likely to slow further in the near term as recession risks grow,” according to Ataman Ozyildirim, senior director of economic research at The Conference Board.
The National Association of Realtors reports existing-home sales for July. Expectations are for a seasonally adjusted annual rate of 4.85 million homes sold, 270,000 fewer than in June. Existing-home sales have declined for five consecutive months.
Friday 8/19
Deere reports third-quarter fiscal- 2022 results.
Write to Al Root at [email protected]
