Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Tesla extends rally as traders bet on potential S&P 500 entry

Stock MarketsJul 22, 2020 12:10PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: The company logo is pictured on a Tesla Model X electric car in Berlin

By Chuck Mikolajczak and Noel Randewich

(Reuters) - Tesla Inc's (O:TSLA) shares extended their rally on Wednesday ahead of a quarterly report from the electric car maker that might clear the way for it to join the S&P 500 and attract over $40 billion in new demand for the stock.

Investors watching the company's quarterly report after the bell will be laser-focused on one question: Was Tesla profitable?

A net profit, under Generally Accepted Accounting Principles, would mark four consecutive profitable quarters, a first for Tesla and a key hurdle for it to be added to the benchmark S&P 500 index (SPX).

While analysts on average expect a loss, estimates improved after Tesla reported higher-than-expected second-quarter vehicle deliveries earlier this month, helping push the stock up about more than 47% so far in July. Tesla shares were last up 1.5% at $1,591.48.

BofA Global Research raised its Tesla price target to $800 from $500, maintaining its "underperform" rating.

"The technical buying ahead of (Tesla's) potential addition to the S&P 500 has added fuel to the run," BofA analyst John Murphy wrote in client note. "However, in our view, the $1,500+ stock price is not supported by fundamentals, with valuation driven largely by momentum and low rates."

Analysts on average expect a $240 million loss for the quarter, compared with an estimated loss of almost $340 million a month ago, according to Refinitiv.

With a market capitalization of about $295 billion, Tesla would be among the most valuable companies ever added to the S&P 500, larger than 95% of the index’s existing components. It would have a major impact on investment funds that track the index.

Graphic: Tesla in the S&P 500? - https://fingfx.thomsonreuters.com/gfx/mkt/dgkpldgxapb/VokA0-tesla-in-the-s-amp-p-500-%20(4).png

An S&P Dow Jones Indices spokeswoman declined to comment about specific changes to the index. Eligible candidates are considered by an index committee that weighs factors including sector balance and size representation. The index committee does not make changes based on a specific timetable.

Investment funds that replicate the S&P 500 have at least $4.4 trillion of assets, according to S&P Dow Jones Indices, and those funds would need to buy Tesla shares quickly to avoid errors tracking the index’s performance.

Ivan Cajic, head of index and ETF research at Virtu Financial (NASDAQ:VIRT), estimated index managers would need to own roughly 25 million Tesla shares, currently worth about $40 billion.

Additionally, actively managed investment funds that benchmark their performance to the S&P 500 would be forced to decide whether to buy Tesla shares. Such funds manage trillions of dollars in additional assets.

Tesla is among the most loved - and hated - stocks on Wall Street. It has surged about 500% in the past year and is the U.S. stock market's most shorted stock, currently at $20 billion, according to S3 Partners.

Tesla extends rally as traders bet on potential S&P 500 entry
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Gamer Turtle
GamerTurtle Jul 22, 2020 3:31PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
rallying of Tesla has nothing to do with its fundamental or its entry to any index. it is going up, simply becuz it can. this is likely true for most companies in recent month and remaining months of 2020.
Ricardo Diogo
Rcd72 Jul 22, 2020 2:33PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Tesla is now on spacex rise...rocket to the 🌟....the higher it gets the bigger will be the fall..0 sustainability it is impossible forindustrial company growth
Muhamed Jaffir
Muhamed Jaffir Jul 22, 2020 12:37PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This stock entering the S&P would be the worst possible outcome for index investors.
NA NA
NA NA Jul 22, 2020 12:37PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Will depend on future earnings I guess, but yeah the price now is insane even if the earnings are going to be great
Edward Chong
Edward Chong Jul 22, 2020 12:37PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
NA NA cos its a insane mkt haha.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email