Tag: Motley Fool

You heard it here first, folks. Zip Co Ltd (ASX: ZIP) outperformed former market darling Afterpay in some crucial measures in the June quarter. One of which was growth in customer spending.

Perhaps the company’s comparatively strong growth has helped bolster the Zip share price lately.

Zip’s stock has gained more than 140% over the last 30 days to trade at $1.24. Though, it’s still 71% lower than it was at the start of 2022.  

So, how did the former S&P/ASX 200 Index (ASX: XJO) buy now, pay later (BNPL) giant succumb to its comparatively minute competitor in the June quarter? Let’s take a look.

Did Zip really outgrow the former ASX fave?

Owners of Zip shares, rejoice. The company recorded notably higher growth than Afterpay in the June quarter, beating its former ASX peer’s total transaction growth by 7%.

On releasing Block Inc (ASX: SQ2)’s latest quarterly results today, the US-based tech monolith announced its recently acquired Afterpay brought in US$5.3 billion of total transactions over the three months ended 30 June.

That represents a year-on-year increase of 13%.

Afterpay’s transaction growth was slowed by shifts to online spending, competition, and foreign currency impacts.

Block chief financial officer Amrita Ahuja noted Afterpay’s growth held up better in its “more mature regions” like Australia, continuing:

Trends have flowed more in North America, a newer market for Afterpay, where the primary vertices of fashion and beauty are both discretionary retail, and where the Afterpay in-person product is still ramping up.

Meanwhile, as my Fool colleague James reported last month, Zip boasted $2.2 billion of transactions in the June quarter – a 20% year-on-year increase. That’s not too shabby.

Its growth was mostly driven by an uptick in the US – the same market Afterpay is seemingly struggling in.

Zip’s transaction volume in the nation rose 17% year on year last quarter. That in Australia and New Zealand lifted just 7%.

Whether the remaining ASX 200 BNPL stock can continue to compete, however, remains to be seen. Particularly as Ahuja pointed to Afterpay’s potential upwards trajectory, saying:

As we integrate Afterpay, we see an opportunity to further diversify, particularly in the US with our base of millions of Square sellers across a range of high ticket verticals and omni-channel products.

The post Did Zip really outgrow former ASX favourite Afterpay in the June quarter? appeared first on The Motley Fool Australia.

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More reading

• Why Amcor, Arafura, Block, and Janus Henderson shares are dropping
• Block share price tumbles 6% as quarterly earnings sink
• Block share price in danger of sinking following Q2 update
• 5 things to watch on the ASX 200 on Friday
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Shares in the global energy giant Woodside Energy Group Ltd (ASX: WDS) are down 2% and other ASX energy shares are also having a day in the red.

At the time of writing, the Woodside share price is trading at $30.89. It has fallen almost 5% over the past month.

The Santos Ltd (ASX: STO) share price is also down today by 1% to $6.93 and the Ampol Ltd (ASX: ALD) share price is down 2.17% to $32.49.

ASX coal shares are also lower — Whitehaven Coal Ltd (ASX: WHC) by 3.62% and Yancoal Australia Ltd (ASX: YAL) by 2.67%.

The S&P/ASX 200 Energy Index (ASX: XEJ) is down 1.85% today.

Why are ASX energy shares having a tough day?

This is likely a response to falling oil prices overnight.

As my Fool colleague James reported this morning, the WTI crude oil price dropped 2.5% to US$88.42 a barrel and the Brent crude oil price lost 3% to US$93.91 a barrel.

Fears of a demand slowdown after a build-up in US crude and gasoline inventories sent the oil prices to multi-month lows.

They are rebounding now though, with Brent up 0.08% and WTI crude up 0.26% at the time of writing.

Woodside share price snapshot

The Woodside share price is up 36% in the year to date but down 5% over the past five trading days.

The last price-sensitive news released by Woodside was its second quarter 2022 report on 21 July.

As my Fool colleague Bernd wrote, the report revealed a 44% boost to revenue compared to Q1 2022. This also represented a 159% boost compared to Q1 2021.

Woodside produced 33.8 million barrels of oil equivalent (MMboe), which was a 60% increase from the prior quarter and up 49% from Q2 2021.

The Woodside share price dipped 0.55% on the day the report was released.

The post Why is the Woodside share price in a slump on Friday? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Friday
• Which ASX 200 shares will prove to be dividend heavyweights this earnings season?
• Why Creso Pharma, Endeavour, Orica, and Woodside shares are dropping
• 2 reasons why I’d pick Woodside shares over Santos
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Bronwyn Allen has positions in Woodside Petroleum Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It’s been a pleasing end to the trading week so far this Friday for the South32 Ltd (ASX: S32) share price.

At the time of writing, South32 shares are up a healthy 2.41% at $3.83 each. That looks pretty good against the S&P/ASX 200 Index (ASX: XJO), which is also up today but only by 0.39%.

But this diversified miner has had a lacklustre few months. South32 shares remain down by almost 6% over 2022 thus far, although the company is up a far more pleasing 29.4% over the past year.

So where might this mining company be heading next?

This ASX broker rates South32 share price as a buy

Well, it’s a decisive ‘higher’ if you ask one of ASX’s most prominent brokers. As my Fool colleague James covered earlier this week, broker Morgans is currently very bullish on the South32 share price.

Morgans currently rates the miner as an add. It has a 12-month share price target of $6 on the company’s shares.

If this share price target became reality, it would mean that South32 shares are heading more than 56% higher over the coming 12 months. Here’s some of how Morgans justified this optimistic share price target:

S32 has transformed its portfolio by divesting South African thermal coal and acquiring an interest in Chile copper, substantially boosting group earnings quality, as well as S32’s risk and ESG profile.

Unlike its peers amongst ASX-listed large-cap miners, S32 is not exposed to iron ore. Instead offering a highly diversified portfolio of base metals and metallurgical coal (with most of these metals enjoying solid price strength).

We see attractive long-term value potential in S32 from de-risking of its growth portfolio, the potential for further portfolio changes, and an earnings-linked dividend policy.

Morgans is also expecting big things from South32 when it comes to dividends. It has pencilled in a fully franked annual dividend of 28 cents per share for FY2022, which it sees rising to 35 cents per share for FY2023.

If this did turn out to be accurate, investors would enjoy forward yields of 7.25% and 9.07% on today’s pricing.

Another broker who sees $6

Morgans is not the only broker licking its lips over the South32 share price today though. As we covered last month, brokers at Macquarie are also eyeing off the company “due to the company’s attractive valuation, strong free cash flow generation, and positive dividend outlook”.

Macquarie has an outperform rating on South32 shares, also with a share price target of $6. It’s expecting even higher dividends from the miner, forecasting payments of 34.5 cents per share for FY2022 and 40.6 cents per share for FY2023.

At the current South32 share price, this ASX 200 miner has a market capitalisation of $17.75 billion, with a dividend yield of 4.36%.

The post Top broker predicts 50% upside for South32 share price. Here’s why appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Broker names 3 of the best ASX shares to buy in August
• These ASX dividend shares have been named as buys for income investors
• Top ASX shares to buy in August 2022
• Here’s why experts say these are the ASX mining shares to buy now

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX lithium shares are charging higher today.

Leading lithium stocks Liontown Resources Ltd (ASX: LTR) is up 4.96% in early afternoon trade and Pilbara Minerals Ltd (ASX: PLS) shares are up 3.61%.

Both ASX lithium companies presented at the Diggers & Dealers Mining Forum in Kalgoorlie, Western Australia, this week.

As attendees heard, the long-term demand outlook for lithium – a lightweight, conductive metal critical in electric vehicle (EV) and home storage batteries – remains very strong amid rapid global growth in EV markets.

This, as the battery metals industry is looking at a US$42 billion funding shortfall to meet that soaring demand, according to Benchmark Mineral Intelligence.

Growing future deficits in lithium supply forecast

According to Pilbara’s presentation at Diggers & Dealers, the expected deficit in lithium by 2040 is the equivalent to some 18 Pilgangooras. The ASX lithium share was referring to its Pilgangoora project, one of the largest hard rock lithium-tantalum deposits on Earth.

It said the forecast deficit comes “with likely pricing implications”.

Lithium prices have already leapt almost 500% since this time last year.

According to Pilbara Minerals CEO Dale Henderson (quoted by Bloomberg), “The appetite is insatiable. Any producer in lithium is very popular at the moment.”

In its presentation, Liontown Resources pointed to research from global consulting firm Boston Consulting Group (BCG). BCG expects overall lithium demand growth of approximately 20% per year from 2020 through to 2035. This will be mostly driven by increased demand for EV and energy storage system (ESS) batteries.

Liontown CEO Tony Ottaviano said (courtesy of Bloomberg):

I don’t want us to come across as self-indulgent because we have immense respect for our customers, but the simple fact is it takes five to eight years to bring greenfield supply online in tier-one jurisdictions.

Ottaviano said that “interest was low” when the ASX lithium share approached car makers and other manufacturers for its first offtake.

“Roll the clock forward and we are seeing a completely different commercial posture,” he added.

How have these two ASX lithium shares been performing?

Over the past 12 months, the Pilbara share price is up 42% while the Liontown share price has gained 74%. That compares to a full-year loss of 7% posted by the All Ordinaries Index (ASX: XAO).

Roll the clock back five years, and these ASX lithium shares have really shot the lights out.

If you’d invested in Pilbara five years ago, you’d be sitting on gains of 689%. As for Liontown, its shares have surged an eye-popping 14,550% in five years.

The post ASX lithium shares facing ‘insatiable’ demand amid global funding gap appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Why are ASX lithium shares having such a top run on Wednesday?
• Here are the 3 most heavily traded ASX 200 shares on Wednesday
• Why BWP, Lynas, Pilbara Minerals, and Pinnacle shares are charging higher
• Pilbara Minerals share price dips despite upbeat lithium outlook

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Novonix Ltd (ASX: NVX) share price is soaring today on no news from the company whatsoever. There’s no sector momentum to explain the increase either, with the S&P/ASX All Technology Index (ASX: XTX) down 0.6%.

At the time of writing, the Novonix share price is up 11.81% to $3.03.

However, the S&P/ASX All Ordinaries Index (ASX: XAO) is 0.43% in the green today, and we know that many ASX shares are starting to rebound off their June lows.

This appears to be because investors are deciding some opportunities are now too good to pass up following the general market sell-off in the first half of 2022.

What’s the latest with the Novonix share price?

So, Novonix has had a screamer over the past month. It’s up 31%. The All Tech index is up 15.4% and the All Ords is also up 6.2% over that period. So, the Novonix share price rise might simply be a case of the stock riding this wave of this new positive market momentum.

As my Foolish colleague Brooke reported, there was only one piece of news released by Novonix in July. That was its report for the June quarter, which caused the Novonix share price to slump 1.6%. The report showed $2.5 million of customer receipts and a $7.9 million operating cash outflow.

But both the broader ASX 200 tech sector and the Nasdaq Composite Index (NASDAQ: .IXIC) had a good month. The NASDAQ lifted by about 12% in July, which was its biggest monthly gain since April 2020.

Bullish comments on the battery materials industry by Tesla Inc CEO Elon Musk were no doubt helpful to Novonix, which operates in the lithium-ion battery space. The Novonix share price rallied 2.8% that day.

A quick recap if you’re unfamiliar with Novonix’s business: Its battery materials segment develops and manufactures battery anode materials. The battery technology segment develops battery cell testing equipment and researches battery development. The tech segment delivers the bulk of Novonix’s revenue.

The post Why is the Novonix share price leaping 12% on Friday? appeared first on The Motley Fool Australia.

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More reading

• Here are the top 10 ASX 200 shares today
• Why did the Novonix share price notch up a 24% gain in July?
• Why is the Novonix share price sliding on Tuesday?
• Here are the top 10 ASX 200 shares today
• Why did the Novonix share price just soar 13%?

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Core Lithium Ltd (ASX: CXO) share price is leaping 6% after the company announced that it’s appointed its first CEO.

Former Rio Tinto Limited (ASX: RIO) senior leader Gareth Manderson will take up the reins at the lithium developer on Monday.

The Core Lithium share price is trading at $1.27 on the back of the news. That’s 4.96% higher than its previous close.

Let’s take a closer look at what Manderson can offer the S&P/ASX 200 Index (ASX: XJO) lithium favourite.

Core Lithium unveils new boss

The Core Lithium share price is surging on news Manderson, who offers 28 years of experience in the mining and minerals sector, will take on the top job at the company next week.

It comes after the company’s founding managing director Stephen Biggins announced his resignation in March.

Manderson was previously Rio Tinto’s general manager in sustaining capital where he focused on the company’s Pilbara operations.

He has also held senior leadership roles in Rio Tinto’s aluminium division and management roles at Energy Resources Australia in the Northern Territory.

Core Lithium chair Greg English commented on Manderson’s appointment, saying:

There are many synergies between Gareth’s previous senior roles in managing complex mine, mineral processing, port, township, and logistics operations during his tenure at Rio Tinto and the Finniss Project.

Gareth’s previous Northern Territory experience and managing the effects of the annual wet season will also be essential as we plan to be operating in this environment for years to come.

Manderson said he is “delighted” to have been offered the top job at “this vital time in the company’s growth”.

He will receive an annual base salary of around $693,000 before super, as well as both short and long term incentives.

Core Lithium share price snapshot

Today’s gains included, the Core Lithium share price has doubled since the start of 2022.

The company’s stock has lifted 102.4% since its first close of the year, which saw it trading at 63 cents.

It has also gained 298.4% since this time last year when it was worth just 32 cents.

The post Core Lithium share price leaps 5% as industry veteran takes reins appeared first on The Motley Fool Australia.

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More reading

• Why did the Core Lithium share price jet 20% higher in July?
• Why Core Lithium, Deterra, Panoramic, and Qualitas shares are racing higher
• Here are the 3 most heavily traded ASX 200 shares on Monday
• Why has the Lake Resources share price rocketed 16% today?
• Core Lithium share price surges 4% on ‘exceptional’ drill results

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Dollar-cost averaging (DCA) is a popular method of investing. It takes the ‘when should I invest?’ question out of the equation. It does so by using a consistent pattern of investing to achieve a smooth cost base over time.

For example, a simple dollar-cost averaging strategy would involve an investor consistently investing say, $500 a month, into an investment, regardless of its pricing. This ensures that you get an ‘average’ entry price over time, negating the need to worry about ‘buying at the top’.

Investors can use a DCA strategy on almost anything, including index funds and individual shares. And yes, even cryptocurrencies like Bitcoin (CRYPTO: BTC).

A DCA strategy is arguably well-suited to an asset like Bitcoin. Bitcoin is, of course, infamously volatile. In just the past year, it has traded as high as US$67,500 and as low as US$19,000.

Rather than dealing with those kinds of extremes, investors who use a DCA will instead bypass this volatility to a degree, and put their investment on ‘autopilot’.

But is a dollar-cost averaging strategy really a good idea for something like Bitcoin?

When to use a dollar-cost averaging strategy for Bitcoin

Well, at least one expert investor thinks so. According to reporting in The New York Times, Cory Klippenstein has some newfound crypto fame. He reportedly became a bit of a name in the crypto world when he called out the “scam” of cryptocurrency Terra (CRYPTO: LUNA). Luna sensationally crashed earlier this year.

Klippenstein runs a Bitcoin company called Swan Bitcoin. It is built on his ‘Bitcoin maximalist’ faith that one day the cryptocurrency “will transform the financial system even as fraud pervades the rest of the crypto ecosystem”.

Swan Bitcoin reportedly caters to “wealthy families, businesses and retail traders to set up Bitcoin investment plans, often through an automatic purchasing program”. This dollar-cost averaging strategy is one that Klippenstein uses himself.

According to the report, he “invests a portion of his own savings in Bitcoin every day” and “has continued to buy at the same rate throughout the downturn” of the past few months.

So that’s at least one advocate of a DCA strategy for Bitcoin. Something to consider for any reader who wants to jump aboard the crypto train, but finds the volatility that comes with it offputting.

The post Is it smart to use dollar cost averaging to buy Bitcoin? appeared first on The Motley Fool Australia.

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More reading

• Bitcoin price dips in August after soaring 22% in July. What’s going on?
• Bitcoin price dips. Is Ethereum on track to dethrone the top crypto?
• Why El Salvador is doubling down on Bitcoin despite the 2022 price crash
• The Bitcoin price is leaping 10% higher today. What’s going on?
• Bitcoin or Cardano: which crypto is most widely held among Aussies in 2022?

Motley Fool contributor Sebastian Bowen has positions in Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia owns and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Xero Ltd (ASX: XRO) share price has enjoyed a strong run this week, up almost 3% since last Friday’s closing bell.

That’s despite the S&P/ASX 200 Index (ASX: XJO) business and accounting software provider slipping 1.97% in lunchtime trading today, currently at $95.64 a share.

It’s not just the Xero share price in the red.

ASX tech shares are broadly struggling today, with the S&P/ASX All Technology Index (ASX: XTX) down 0.61% at the time of writing compared to a 0.41% gain posted by the ASX 200.

That’s the latest price action.

In an announcement unlikely to be having a major impact on the Xero share price today, the company reported it’s moving to an Asia Pacific (APAC) regional leadership structure.

Why the change to an APAC regional leadership structure?

According to the release, Xero is making the change to combine its talent and capabilities to support its growth plans. The company also said the new leadership structure will strengthen its value to its partners and customers across the region.

Under the new structure, Xero’s leadership across Australia, New Zealand, and Asia will be combined into an Asia Pacific Region.

Commenting on the change, Xero’s chief customer officer Rachael Powell said:

These changes will allow us to better align and share leadership talent and resources across APAC, to ensure we continue to improve Xero’s engagement with our small business customers and accounting and bookkeeping communities.

Xero’s country managers will join an APAC leadership team led by the newly appointed managing director APAC, Joseph Lyons.

Lyons, Xero’s current managing director for Australia and Asia, will now also lead APAC. This will include oversight of New Zealand from October.

“Joseph has excelled in his time as managing director Australia and Asia, and I know he will take on expanded responsibilities in the APAC role with determination and passion, ensuring that we are engaging Xero’s customers and partners,” Powell said.

Xero share price snapshot

The Xero share price is down 35% in 2022. That compares to a year-to-date loss of 25% posted by the All Tech Index.

The post What’s happening with the Xero share price at the end of a strong week? appeared first on The Motley Fool Australia.

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More reading

• Why are ASX 200 tech shares having such a stellar run today?
• Experts name 2 beaten down ASX shares that could be going cheap
• Broker gives its verdict on the Xero share price following new product launch
• 2 excellent ASX tech shares experts say are buys
• How are ASX 200 tech shares performing on Wednesday?

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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July saw the broader market partially rebound after a rough few months, but one S&P/ASX 200 Index (ASX: XJO) wasn’t involved in the upwards action. The Flight Centre Travel Group Ltd (ASX: FLT) share price traded relatively flat despite the index’s exuberance.

The stock’s weak trade also came despite the company posting exciting news of its full year earnings, set to be released on 25 August.

After closing June at $17.36, the Flight Centre share price was trading ever so slightly lower at $17.22 come the end of July. That represents a 0.8% fall over the course of last month.

Meanwhile, the ASX 200 surged 5.74% higher to recover most of its June losses.

So, what might have weighed the Flight Centre share price down last month? Let’s take a look.

What weighed on the Flight Centre share price in July?

The Flight Centre share price slipped slightly last month amid plenty of kafuffle in the travel industry.

Australia dropped COVID-19 vaccine mandates for international arrivals, the July school holidays proved a hugely popular time to travel, and many called for Australia to close its border with Bali in a bid to avoid an outbreak of foot-and-mouth disease.

On top of that, the surging spread of COVID-19 and influenza saw chaos erupt at airports. At one point, Qantas Airways Limited (ASX: QAN) cancelled or delayed 15% of domestic flights for more than an hour.

But there was some major positive news from Flight Centre in July.

The company upgraded its guidance for financial year 2022 by around 12%. It now expects to post an underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) loss of $180 million to $190 million. That would see it breaking even on an EBITDA basis in the second half.

The company’s short position also improved last month. It fell from 16.17% at the end of June to 15.15% on 29 July – the latest data available.

Sadly, that still leaves the stock wearing the crown of short sellers’ favourite ASX share.

The post Why did the Flight Centre share price underperform the ASX 200 in July? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Tesla Inc (NASDAQ: TSLA) shares have become one of the most famous investments in the world over the past few years.

Helped by a number of factors, including the company’s breakneck growth, the… eccentricities of Tesla CEO Elon Musk, and sometimes feverish dedication from its base of retail investors, Tesla shares have long been one of the most-watched stocks on the US markets.

The elephant in the room is of course the life-changing stock price gains this company has given investors in recent years. Back in 2019, the electric vehicle and battery manufacturer was a US$40 stock. Today, it has just closed at US$925.90 a share, representing a gain of almost 2,000% over the past three years.

Late last year, Tesla shares reached a record high of US$1,243.49 each, which was a gain approaching 3,000% from the benchmark we just discussed. As the company stands today, Tesla is now the fifth-largest share on the US markets by market capitalisation.

It’s now larger than companies like Johnson & Johnson and Warren Buffett’s Berkshire Hathaway.

But right now, the Tesla stock price could be described as prohibitively expensive for many investors. After all, an investor wanting to open a position in Tesla would need US$925.90 (or almost $1,324 in our currency) just to buy a single share.

Well, that looks like it is about to change.

Tesla announces three-for-one stock split

According to reporting in Forbes, Tesla shareholders have just approved a stock split for the company.

A stock split is where a company ‘splits’ and reissues its shares at a lower price. The volume increases but the value decreases. To use the common metaphor, it is akin to reslicing a pizza into smaller slices. The overall valuation of a company doesn’t change, only the number and individual value of the shares.

In Tesla’s case, a three-for-one split was approved. This means that when the split takes effect, Tesla’s share count will be increased by a factor of three, which means that each share will be worth a third of what it used to be.

So if an investor owned 10 Tesla shares, each worth US$925.90 today, they would own 30 Tesla shares, each worth approximately US$308.63, if the split went ahead.

As you can see, the investor still owns a total of US$9,259 worth of Tesla under either scenario. Thus, the ‘size of the pizza’ remains the same.

So why do companies do stock splits then, if the outcome is so inconsequential?

How does a stock split benefit Tesla shares?

Well, a smaller individual stock price can increase the liquidity of a company’s stock, for one. It also helps smaller, individual retail investors access the now-cheaper shares. Additionally, it creates some publicity for the company too (here we are talking about it).

In the past, we have seen many different stocks rally after the announcement and execution of a stock split. That’s despite the fact it does not increase the underlying fundamental value of a company, as we’ve discussed.

Tesla is not the only big-name company to undertake a stock split in 2022. We’ve also seen stock splits from Amazon.com Inc (NASDAQ: AMZN) and Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) this year. Both of these were 20-to-1 splits.

Indeed, it was only back in 2020 that Tesla undertook its last stock split, a five-to-one division at the time. We don’t know yet when this latest split will take effect, but no doubt the company will announce this soon.

Tesla shares remain down close to 23% in 2022 thus far, although the company has rallied by almost 33% over the past month alone.

At the company’s last stock price, Tesla has a market capitalisation of US$967.1 billion.

The post Think you can’t afford to buy Tesla shares? Think again… appeared first on The Motley Fool Australia.

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More reading

• Why Tesla and other EV stocks rocketed higher in July
• Why Tesla shares bounced ahead of its stock-split vote
• Why the Tesla share price jumped on Monday
• Tesla Q2 earnings call: 3 must-see quotes from Elon Musk
• Tesla beats earnings estimates and sells Bitcoin — Is the stock a buy?

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Alphabet (A shares), Amazon, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Tesla. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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