Tesla stock pops on 5-to-1 stock split news

Yahoo Finance weighs in on what Tesla's stock split means for investors.

Video Transcript

JULIE HYMAN: We want to turn to a specific stock story now, and that is Tesla-- the company announcing a 5 for 1 stock split. And it's going to do this split and basically around the end of the month. Rick, I know you watch Tesla closely-- although, typically, you watch it more on the nuts and bolts of the thing and how the car runs. But what's your reaction to this, when Tesla's shares have already gone so crazy?

RICK NEWMAN: Yeah, the share price is above $1,500. I mean, it's had an enormous run-up. So I mean, this stock split doesn't tell us anything about the cars that Tesla is making or about its profitability. I guess Tesla's just deciding they want the stock to be a little more accessible, which is basically what they indicated. So they're following what Apple did a few weeks ago with a 4 for 1 split. And you know, stock splits have gone out of favor now that so many people can buy stocks via ETFs, or you can even do fractional purchases. But we now have two, Apple and Tesla.

So I guess the question is, will we get a third? And will it, therefore, become a trend? You know, there are a couple of stocks people are looking at. Amazon is over $3,000 a share. Could they potentially do a split? Google is pretty high, Microsoft, a few others. So two is not a trend, but three would be.

ADAM SHAPIRO: OK, the stock split aside, let's look at Tesla, because you follow cars very closely. A guest in the last hour I talked about Tesla being more than just a car company and used a term that got my ears up, which was self-sustaining micrograde-- talking about the battery technology so that you can plug it into your house. And there are people-- I know people in New Jersey who put on solar panels, you get the tax break, and they got the battery on the side to store some of this. Should we stop thinking of Tesla just as a car company?

RICK NEWMAN: Well, Tesla does not want you to think of it as a car company. So that's straight out of the Tesla PR manual, I think. And that is how you explain the valuation, Adam. So Tesla is now worth more than Toyota, which is the world's most profitable automaker. And if you think of Tesla as an automaker, that makes no sense whatsoever, because their market share in terms of cars is below 1%, whereas Tesla sells one out of every 10 cars in the world.

So you know, the analysts we have on, I mean, I've asked many of them this question, and they say Tesla is basically an ecosystem. It's becoming a power ecosystem, and that's the goal. So I'm not sure that's true. That's what Tesla is trying to do. You know, I think the adoption of electric vehicles is slower than a lot of people expected, and I think we're still going to be driving gas-powered cars 10 years from now. But look, this idea that it is an ecosystem of its own does explain the valuation.

JULIE HYMAN: It does. It's one explanation for it, anyway.