Automobile giant Tesla finally makes its way to the S&P 500 on Monday after reporting five consecutive quarter in profits and becoming the world’s most valued automobile company.
The long-awaited story comes to a nice ending as American automobile giant Tesla Inc (NASDAQ: TSLA) secures a place in the country’s coveted S&P 500 index (INDEXSP: .INX). The official announcement came Monday, November 16, as S&P Dow Jones Indices said that the electric carmaker will join the benchmark index before December 21, 2020.
Tesla stock jumped 13% in the aftermarket hours on Monday. On Monday closing, TSLA stock was trading at a price of $408. However, it added another 53 points as the news broke out. Joining the S&P 500 index will also give Tesla higher respectability and identity as a blue-chip company.
The automobile giant will be trading with other heavyweights like Berkshire Hathaway Inc (NYSE: BRK.A), Apple Inc (NASDAQ: AAPL), and Microsoft Corporation (NASDAQ: MSFT). In a statement, the S&P Dow Jones Indices noted:
“Tesla will be one of the largest weight additions to the S&P 500 in the last decade, and consequently will generate one of the largest funding trades in S&P 500 history. However, Tesla itself is very liquid, and adding the stock at the upcoming December quarterly rebalancing coincides with the expiration of stock options, stock futures, stock-index options, and stock-index futures, which may help facilitate the funding trade.”
Tesla has checked all the boxes of criteria required for an entry to the S&P 500 index. Tesla has been long mulling for its entry in the S&P 500. But finally, after months of speculation, it has finally managed to secure its position. With this, Tesla gets a position in the “Index Committee” at the S&P DJI that analyzes several quantitative as well as qualitative factors.
However, Tesla had to face a temporary setback in September during the quarterly rebalancing of the index. The S&P 500 requires that the company must report four straight quarters of profit.
Begore Joining S&P 500 Tesla Reports Fifth Consecutive Quarter of Profits
Recently, Tesla reported its third-quarter revenue and the fifth consecutive quarter of profit. Setting up a new record, Tesla reported 139,300 vehicle deliveries. The TSLA stock has a phenomenal run this year multiply 5x year-to-date.
Since the beginning of 2020, the TSLA stock has appreciated 400% so far and continues to make new record highs. On Monday after hours, the TSLA stock is trading at $461. Currently, Tesla is the largest valued global automobile with a market cap of nearly $400 billion. In 2020-alone, Tesla overtook all other rivals on the home turf as well as overseas. Market analysts cheered on Tesla’s latest entry to the S&P 500 index. Ross Gerber, chief executive officer at Gerber Kawasaki Inc said:
“This was a little unexpected happy day for me. It was just kind of mind-blowing that Tesla still wasn’t in the S&P. So sure enough, here it is”.
Tesla is one of the biggest holdings for Gerber Kawasaki. The company holds 130,000 TSLA shares worth $55 million. Dan Ives, an analyst at research firm Wedbush Securities said:
“This is another major feather in the cap for Tesla bulls joining the S&P 500. It speaks to the sustained profit trajectory that Tesla is now finally getting into this elusive club after much noise on the Street.”
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
