Tesla (TSLA) may still be eligible for S&P 500 inclusion despite a possible Q2 profit miss. This is according to a recent report from Bloomberg Intelligence, which stated that the company’s large size and its position in competing large-cap benchmarks could persuade the S&P 500’s committee to make an exception for the electric car maker.
Following is Bloomberg Intelligence’s report.
Tesla Inclusion in S&P 500 May Require Human Intervention
(Bloomberg Intelligence) — Tesla’s outsized returns this year are likely driven partly by prospects for its imminent inclusion in the S&P 500, yet a history of 2Q losses could stand in the way. If Tesla repeats that pattern, we expect the index committee to make an exception and add the automaker anyway, given its size and position in competing large-cap benchmarks.
Tesla’s potential inclusion to the S&P 500 has captured the attention of both TSLA bulls and bears alike. With the Q2 2020 Earnings Call less than a week away, it’s only a matter of time before the company reveals whether it was profitable in the second quarter of 2020 or not. If it is, then TSLA could enter a new chapter in its storied history.
S&P Inclusion pic.twitter.com/TjwIJjehvk— Alex (@alex_avoigt) July 17, 2020
Recent activities from CEO Elon Musk and Tesla itself suggests that the company is in high spirits. Following the end of June, Elon Musk sent an email to Tesla employees congratulating them for their efforts in delivering and producing electric cars. Tesla’s Q2 2020 numbers, which included over 90,000 vehicle deliveries, further added to the momentum of TSLA stock. Finally, Tesla released its Short Shorts merchandise as well, seemingly as a playful poke at its most ardent critics.
As noted by Rob Maurer in his Tesla Daily podcast, the S&P 500 requires that a company’s last four quarters in summation are profitable and that the previous quarter is profitable. Tesla has posted three profitable quarters so far, comprised of 143 million in Q3 2019, $105 million in Q4 2019, and $16 million in Q1 2020. If Tesla manages to post even a dollar of GAAP profit for Q2 2020, it could successfully meet the S&P 500’s requirements.
An inclusion to the S&P 500 would likely benefit Tesla, since the index itself is benchmarked by numerous financial firms that manage trillions of dollars. Since these funds commonly buy shares from companies that are new members of the S&P 500, TSLA stock could experience a massive buying spree from some of the financial market’s largest players if it qualifies for the index.
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