After Q2 earnings, I updated my price target for Tesla (NASDAQ:TSLA) stock to $765 pre-split, which implies 14% downside from the current price. As I've shared in past articles (1,2), the key assumption inmy model is that Tesla grows at a 25% CAGR over the next decade primarily due to growth in electric vehicle sales. While the upcoming Tesla stock split isn't material to my thesis, investors may have questions about how the split works, and I'll attempt to answer some of the common ones in this article.

Stock Split FAQs

I covered Tesla's stock split in my last article, but I'll recap a few of the key questions and answers about the split here. Those who read my previous article or are experienced with stock splits can skip to the next section.

How Do Stock Splits Impact Your Investment?

The total value of your investment isn't directly impacted by the stock split because a company's market cap is unchanged by stock splits. The decrease in price per share is offset by the increase in the number of shares you own.

For example, say Tesla is worth $900 before the split and you have one share. After the split, you'll have three shares, but each will be worth $300. Either way, you have $900. Of course, the value of Tesla stock may change as the market rises and falls from day to day, but that happens whether or not there's a split going on.

It's also worth noting that the price per share and price per options contract will be lower after the split, which will make non-fractional shares and options more accessible to small investors.

What Happens If You Buy Tesla Before The Split?

Buying Tesla stock before the split is not very different from buying it after the split or any other day. You'd buy 3x fewer shares before the split as you would after the split in order to keep the total amount invested the same.