Today, November 16th, 2020, S&P 500 has officially announced Tesla Inc (NASDAQ: TSLA) will be included in the index.
With five profitable quarters, Tesla already met the requirements for inclusion into the S&P 500 after the Q3 2020 earnings report, which requires that a company’s last four quarters in summation are profitable, and that the previous quarter is profitable.
The S&P 500 press release reads:
"NEW YORK, November 16, 2020: Tesla Inc. (NASD:TSLA) will be added to the S&P 500 effective prior to the open of trading on Monday, December 21 to coincide with the December quarterly rebalance. Due to the large size of the addition, S&P Dow Jones Indices is seeking feedback through a consultation to the investment community to determine if Tesla should be added all at once on the rebalance effective date or in two separate tranches ending on the rebalance effective date. Tesla will replace a S&P 500 company to be named in a separate press release closer to the rebalance effective date."
After Tesla reported four consecutive profitable quarters, it could have been added to the S&P 500. However, this did not happen--coming as a surprise to many investors. On October 21, Tesla reported stellar Q3 2020 results--the best quarterly profit to date, and the fifth consecutive profitable quarter.
Following the announcement of a profitable quarter and confirmed expectations that the company will be able to achieve its goal of selling half a million vehicles this year, a number of analysts have been raising their price targets and upgrading the stock.
Tesla will now be included in the S&P 500, which is a logical step for the index. With Tesla, we have the most valuable automaker in the world, with an unprecedented market capitalization of over $386 billion. Tesla would be the ninth largest component, trailing, for now, behind Walmart, and ahead of Johnson & Johnson.
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Eva Fox holds zero shares of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.