After what has been a phenomenal year for Tesla (NASDAQ: TSLA), the company is on the verge of hitting another major milestone before the end of the year. The electric car company, which has since become the most valuable car company in the world, announced it will officially be joining the S&P 500 index on December 21st.
Above all else, the move is considered to be a big symbolic win for Tesla, which has managed to prove its detractors wrong this past year. This is in spite of the coronavirus, which has largely hurt car sales in most companies around the world. Inclusion in the S&P 500 requires, among other things, at least four consecutive profitable quarters in a row. Tesla has managed to report five straight quarterly profits, the first time in the company’s history.
The specific company that Tesla will be replacing will be announced later in December. Most investors are looking at this development as a positive piece of news, as are the majority of Wall Street analysts covering the stock.
“It’s the cherry on top of a very successful year for Musk. It’s probably the ultimate symbolic vindication for Elon Musk that he is being recognized by this significant financial index,” said Toni Sacconaghi, an analyst with Bernstein Research. However, not everyone is as optimistic about this move. David Trainer, a well-known Tesla skeptic and CEO of investment research firm New Constructs, warned that the S&P could become much more volatile due to the inclusion of Tesla. “S&P is making a big mistake and adding lots of downside risk to the index by including Tesla. I think Tesla’s addition to the S&P 500 might be a catalyst for a lot of large investors to dump the stock and take gains.”
The rise of Tesla over this past year has helped bolster the shares of other electric car makers, with the general excitement over the EV market growing to a feverish pitch. While many of these companies are competitors, good news for Tesla is seen more as proof that other EV companies can find success as well. Many of these companies, like Nio and Xpeng, are based out of China.
Shares of Tesla are up 13.2% in after-hours trading on Monday evening. Tesla has shot up over 500% since the start of the year, making it one of the best performing large-cap stocks on the market. At the same time, Tesla has already become the most valuable automaker with a market cap of $348 billion, almost twice that of Toyota. The main question going forward is just how much higher Tesla can rise. According to Musk, apparently much more.
Tesla Company Profile
Founded in 2003 and based in Palo Alto, California, Tesla is a vertically integrated sustainable energy company that also aims to transition the world to electric mobility by making electric vehicles. It sells solar panels and solar roofs for energy generation plus batteries for stationary storage for residential and commercial properties including utilities. The Tesla Roadster debuted in 2008, Model S in 2012, Model X in 2015, Model 3 in 2017, and Model Y in 2020. Global deliveries in 2019 were 367,656 units. Tesla went public in 2010 and employs about 50,000 people. – Warrior Trading News
