News that Tesla has won a spot in the exclusive S&P 500 could spark a mad investor rush for the shares as tracker funds are forced to buy the electric car maker’s stock.
Tesla rallied more than 12% in after-hours trading on Nasdaq overnight, hitting an implied $459.90, after S&P Dow Jones Indices announced that the company would join the S&P 500 index on 21 December.
It said: '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.’
This could see the stock added in more than one tranche to help the market absorb the company more comfortably.
BIGGER THAN WALMART
With a market capitalisation of more than $435 billion, Tesla will rank as the eighth largest S&P 500 stock, ahead of the world’s largest retailer, Walmart at approximately $432 billion.
Tesla has been large enough to qualify for the index for more than a year but its patchy profit performance had counted against it. This final hurdle was jumped when the company reported blockbuster third-quarter earnings and revenue that handsomely beat analyst forecasts after seeing ‘substantial’ growth in vehicle deliveries.
TESLA’S BEST QUARTER IN HISTORY
Revenues rose almost 40% to $8.77 billion, while net profit jumped 130% to $331 million, its fifth quarter on the spin of profits. Earnings per share (EPS) came in at $0.76 in what one commentator called its ‘best quarter in history’.
Analysts had anticipated EPS of $0.55 on $8.26 billion revenue.
That said, all of Tesla’s net profit came from selling ‘green’ regulatory credits, not from car sales cars. The company is able to sell these to other automakers, like Toyota, Ford and Volkswagen, who still sell millions of dirty fuel, mass market motors.
Sales of these pollution tokens totalled $397 million during the quarter, so without that revenue, Tesla would not have made any profit at all. Tesla has said that profits from credits, which do not reflect the performance of its underlying business, are expected to fall away in future.
