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The finer points of the Tesla (TSLA) S&P 500 inclusion

This week, it was announced that Tesla (NASDAQ: TSLA) would join the S&P 500 index on December 21st. The news shot the stock up nearly $ 100 in just two days, with most of the wave coming right after Tuesday’s announcement. While it’s impressive enough that Tesla will finally be included in S&P, some finer points are not discussed, like Tesla’s young age compared to other companies in the index and its massive size that goes into the date of inclusion.

Tesla’s 2020 performance on Wall Street has been more than impressive, and it was only a matter of time before larger, more prestigious investment indices would appear to acquire the electric car company. After rising from $ 86 to over $ 500 throughout the year, Tesla broke another record this week after hitting its high price per share. Stock on Thursday.

Tesla could be the 6th most valuable company in the index

With the increase in the share price comes an extreme growth in terms of the company̵

7;s market value, and the significant increase in price per share. Shares have contributed significantly to Tesla’s valuation. If Tesla were to be added to S&P today, it would be the sixth largest company in the index ahead of Berkshire Hathaway and behind Alphabet Inc., Google’s parent company.

The only companies that would be considered more valuable than Tesla would be Alphabet Inc. Class A stocks, Facebook, Amazon, Microsoft and Apple, all of which are leaders in their respective industries. While Apple and Microsoft could be considered a 1-2 blow in the technology world, the other companies are certainly at the forefront of the package in their respective sectors.

Tesla will be one of the youngest companies in the index

When Tesla was founded in 2003, it will be 17 years when it joins the S&P 500 index in December. It makes the addition of the company even more important because its impact in such a short time is clear. While many of us recognize Tesla as an EV technology leader, the company can be considered a leader in the automotive industry altogether. This is simply incredible when you consider that Tesla has only had cars on the road since 2008 and has only been a mass market car manufacturer since 2017 when the Model 3 was introduced.

However, Tesla has a huge impact on other car companies. Older carmakers are struggling to stay relevant and admit to switching to electrification. With Tesla leading this charge, new tricks are being taught to old dogs. It’s just a matter of whether the old dogs choose to continue learning “new tricks”. If they do not, they will slowly disappear as electric cars become more popular on the road.

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Tesla is one of the only car companies in the index

Tesla joins GM and Ford, two of the biggest names in the automotive sector, in the index. The S&P 500 inclusion requirements are high, as is a market value of $ 8.2 billion, has at least 10% of outstanding shares, has been profitable in the last quarter and has a continuous string of at least four profitable quarters.

2020 has not been the most forgiving year for many companies, and automakers are no exception. Demand for new vehicles has actually fallen off the table due to the COVID-19 pandemic, and it has caused many once successful car companies to taste the momentum loss. Companies that manufacture gasoline-powered sedans at affordable prices are also experiencing demand because people cannot afford new vehicles.

Because of this, large car companies listed on the NASDAQ are missing out on their ability to tighten consecutive quarters and provide profitable margins to their investors. But Tesla does not have this problem because their cars are more than just vehicles. They are software devices. They are new ways to get from point A to point B. And with many people worried about climate issues, electric cars are the only acceptable way to travel.

Tesla joins S&P during a year in which growth was almost impossible

To grow on the previous points, this year should be dramatically difficult for almost every business on the planet that would not increase the work efficiency of a pandemic. Early winners were companies like Zoom that created communication opportunities without being near other people. No one would have thought that a company selling $ 35,000 + cars would see this much growth, but it has.

Tesla’s corporate mission attacks more than one problem in today’s world. Many investors and companies forget this fact: Tesla is not just a car company. They manufacture solar panels, large batteries and cars. Not to mention that their energy products are suitable for both commercial and private use, making them desirable for a large market.

If we could all go back to the beginning of the pandemic, we would bet car companies would not do well this year. They did not. But Tesla did, and that’s because their identity as a true technology company has helped them rise above the “automaker” or “sustainable energy company” brand. Tesla is bigger than that, and when investors realize it, their portfolios will benefit from it.

I use this newsletter to share my thoughts on what’s going on in the Tesla world. If you want to talk to me directly, you can email me or contact me on Twitter. I do not bite, be sure to reach out!

Update: Revisions made in the third section at. 9.45 EST.

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