Tesla (TSLA) will be larger than 95% of the S&P 500 if it qualifies for the index

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Following the release of its Q2 2020 vehicle delivery and manufacturing record, Tesla (NASDAQ:TSLA) seems to have a solid chance at qualifying for its S&P 500. What is remarkable is that if Tesla were to be eligible for the S&P 500, it might end up being larger than about 95% of the firms currently included in the index. 

Tesla posted over 90,000 automobile deliveries of the quarter, far over Wall Street’s consensus of 74,000 vehicles that were around. Amidst Elon Musk’s leaked email for workers congratulating them for their work throughout the quarter, as well as the cheeky release of Deadly Short Shorts because the company’s newest apparel, speculations suggest that the firm could very well post another profitable quarter. 

Composing a gain for Q2 2020 would be a landmark for Tesla. By doing so, the business would have the ability to report a net gain for four consecutive quarters, a key hurdle that would let it qualify for your S&P 500. So far, Tesla has already managed to report a net profit at the last three quarters: $143 million in Q3 2019, $105 million in Q4 2019, and $16 million in Q1 2020. 

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With its day cost of approximately $1,400 each share, Tesla’s market cap stands at roughly $250 billion. This produces the automobile maker that is electrical larger than about 95% of the businesses presently contained at the S&P 500. Also interesting is that fellow American automakers such as GM and Ford — whose market caps are dwarfed by Tesla — are currently listed in the catalog. 

While thoughts are optimistic about Tesla and its potential inclusion in the S&P 500, a S&P Dow Jones spokesperson has declined to comment about some upcoming changes to the index. Tesla, for its part, has been silent about the topic. 

If Tesla were to be eligible for the S&P 500, something would happen. As noted at a Reuters file, actively managed investment capital which benchmark their performance to the S&P 500 will probably end up buying TSLA inventory. These investment funds typically handle trillions of dollars in assets that are additional. Jim Bianco, head of Bianco Research in Chicago, explained such a situation. 

“Even in case you don’t like Tesla and you believe it’s overvalued, the simple fact that it is currently going into the index would imply trillions of dollars could have some kind of position. Included in the reference, portfolio managers wouldn’t be in a position to ignore it,&rdquo. 

Tesla’s potential inclusion into the S&P 500 will probably be determined after this month after the business posts its second quarter financial results and its Q2 2020 earnings call. If Tesla were to post yet another quarter, then it might emphasize the growth of energy and the end of fossil fuels, a trend that has been described in some circles as the “Tesla Effect. ” 

Disclosure: I don’t have any ownership in shares of TSLA and don’t have any plans to initiate some places. 

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