S&P 500

Tesla (TSLA) Now Eligible For S&P 500 Inclusion

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Featured Image Credit: Tesla

Tesla (TSLA) is now eligible for inclusion into the S&P 500 index, thanks to another profitable quarter despite the presence of a pandemic. During Q2 2020, Tesla posted a non-GAAP net income of $451 on revenue of $6.036 billion, beating Wall Street’s estimates. With these results, Tesla has achieved what critics thought of as impossible — it was able to record four profitable quarters in a row. 

With four profitable quarters, Tesla has now met the requirements for an inclusion into the S&P 500, which requires that a company’s last four quarters in summation are profitable, and that the previous quarter is profitable. Prior to Q2 2020, Tesla has already recorded three consecutive profitable quarters: $143 million in Q3 2019, $105 million in Q4 2019, and $16 million in Q1 2020. This meant that even a $1 profit for the second quarter could have qualified Tesla for the S&P 500. 

But Tesla posted far more than that. With a $451 million non-GAAP net income, Tesla’s Q2 was a strong quarter. This would likely put the S&P 500 on notice, and it could pave the way for the EV automaker to be included in the esteemed index. After all, Tesla is already larger than 95% of the S&P 500’s members, dwarfing other carmakers in the index like GM and Ford. 

The inclusion of Tesla into the S&P 500 has not been confirmed yet, but the company’s Q2 2020 results suggest that there is a good chance that it will be added to the index in the near future. As stated in a recent Bloomberg Intelligence report, Tesla may be up for S&P inclusion even if it were to record a loss in Q2. This was because of the company’s current size and position in large-cap benchmarks. As it turned out, these special considerations were not required.

Tesla bull Rob Maurer explained in an episode on his Tesla Daily Podcast that Tesla’s inclusion into the S&P 500 would likely benefit the EV automaker. This is because the index is benchmarked by many financial firms that manage trillions of dollars. It’s speculated that a good number of these financial firms do not have TSLA stock yet. 

Since these companies tend to purchase shares of new members of the S&P 500 or risk deviating from the index itself, these firms will likely end up buying TSLA shares once the company qualifies for the index. Tesla is not part of the S&P 400 either, which means that the number of funds buying into the company will likely be significant. 

Legal Disclaimer --

This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Ma. Claribelle Deveza, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Ma. Claribelle Deveza 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.

About the Author

Ma. Claribelle Deveza

Ma. Claribelle Deveza

Longtime writer and news/book editor. Writing about Tesla allows me to contribute something good to the world, while doing something I love.

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