Prediction: TSLA Will Split Its Stock Under a Trump Presidency

Tesla Inc. (NASDAQ: TSLA) has transformed its stock structure twice since its initial public offering in 2010, executing two stock splits in the last four years. The first occurred in 2020 when shares were trading at $2,250, followed by a five-for-one split that brought the price down to $450. The second took place two years later when Tesla shares hit $900, leading to a three-for-one stock split, reducing the price per share to $300. With TSLA currently trading under $289, it seems unlikely that the car manufacturer will opt for another split anytime soon. However, the prospect of a third stock split could very well materialize by 2028, especially considering the intersection of Tesla’s market performance and the political landscape.

Elon Musk’s Connection with Trump

Elon Musk’s strong ties with former President Donald Trump have begun showing potential benefits for Tesla. Stocks surged 15% the day after Trump’s election victory, signaling positive investor sentiment that could extend throughout Trump’s administration. With the right combination of favorable policies and market conditions, Tesla’s stock may rise sufficiently to warrant another split before the conclusion of the next presidential election cycle.

Tesla’s Market Position and Future Prospects

Despite initial concerns that a Trump presidency might not favor Tesla, several policy proposals could actually strengthen the company’s market position relative to its competitors. Trump has suggested eliminating the $7,500 tax credit on electric vehicles (EVs) that incentivizes consumer purchases and curtailing federal loans designed to stimulate more EV production and battery manufacturing in the U.S. However, many of Tesla’s models, including the Model 3 and the forthcoming Cybertruck, have already lost these tax credits. In fact, Musk has previously expressed support for the elimination of industry-wide subsidies. They might serve to cushion competitors, and thus, maintaining as level a playing field as possible could significantly benefit Tesla.

Profitability in a Changing Landscape

As the leading EV maker in the U.S. — though it recently lost its title to China’s BYD (OTC: BYDDY) on a global scale — Tesla stands out as the only profitable automotive manufacturer in the electric vehicle space. Rival manufacturers like Ford (NYSE: F) and General Motors (NYSE: GM) are currently pausing their EV production strategies to recalibrate how they can achieve profitability in this rapidly evolving market.

Mitigating Competition from Chinese Imports

Trump’s trade policy proposals could further assist Tesla by potentially imposing tariffs ranging from 10% to 20% on imports, with products imported from China subject to duties as high as 60%. Such tariffs would likely render cheaper EVs from Chinese manufacturers like BYD, Nio (NYSE: NIO), and Xpeng (NYSE: XPEV) prohibitively expensive, possibly steering foreign competitors away from the U.S. market entirely. This would lead to a significant decrease in market competition for Tesla, allowing the company to further consolidate its market share.

Corporate Tax Reforms

Additionally, under Trump’s proposed tax reforms, which include lowering the corporate tax rate to 15% for companies that manufacture in the U.S., Tesla could see its profit margins expand substantially. Increased profitability often leads to significant gains in stock price, particularly for a dominant player in a growth sector like Tesla. If the stock price were to rise to $900 per share again, this would represent a tripling in value — a prediction that isn’t outlandish, especially with the potential for an economic rebound.

Conclusion

Considering all factors, a third stock split for Tesla appears plausible within the next four years. As the company continues to navigate the complexities of the automotive landscape and capitalize on favorable economic and political conditions, investors might find themselves anticipating yet another opportunity to benefit from an innovative industry leader. In summary, as Tesla navigates under a potentially favorable political climate, its share price could very well soar, leading to what many believe is a promising stock split ahead.