The Briefing
- With positive earnings in each of the last four quarters, Tesla is now eligible to join the S&P 500. They will be the 8th largest stock and 7th largest company on the benchmark index, with a market cap of $544 billion
- Tesla’s inclusion in the S&P 500 will commence in December of this year—an additional blow to Tesla bears as the index brings with it an additional layer of prestige
The New Kid On The Block
Tesla will be joining the S&P 500 in December, gaining eligibility for inclusion after posting positive earnings over four consecutive quarters.
In Q3’20, the company made $331 million in profits, and delivered 139,300 vehicles. The stock has been on a tear in recent years, and joining the index only furthers the automaker’s momentum – dealing another blow to the increasingly hopeless short sellers along the way.
| Company | Market Cap | TTM Earnings |
|---|---|---|
| Apple | $1,971B | $55B |
| Microsoft | $1,617B | $44B |
| Amazon | $1,569B | $11B |
| Alphabet | $1,193B | $34B |
| $785B | $18B | |
| Berkshire Hathaway | $547B | $81B |
| Tesla | $544B | $0.5B |
| Walmart | $430B | $14B |
| Visa | $411B | $10B |
| Johnson & Johnson | $377B | $34B |
Anything But Standard
Standard & Poor’s have quite the criteria before a company can be considered for inclusion in their flagship index. To be part of the S&P 500, a minimum market cap of $8.2 billion is required.
Of course, market cap is not where Tesla’s weakness is. Valued at $544 billion, right off the bat they will be one of the top S&P 500 companies. Rather, net income has been the struggle for Tesla. After government subsidies, they posted $556 million in trailing twelve month (TTM) profits, placing them 357th in the index.
By market cap, Tesla runs with some of the all-time greats and will be the largest inclusion to join the index ever. When ranked by net income though, a much different ranking emerges:
| Rank | Company | Symbol | Annual Net Income |
|---|---|---|---|
| 355 | Tractor Supply Company | TSCO | $562M |
| 356 | Mettler-Toledo International | MTD | $561M |
| 357 | Tesla | TSLA | $556M |
| 358 | Huntington Ingalls Industries | HII | $549M |
| 359 | Zebra Technologies | ZBRA | $544M |
By this metric, the automaker can be found adjacent to lesser-known Mettler-Toledo and Tractor Supply Company.
The EV Revolution
As the electric car movement continues full steam ahead, Tesla as the market leader will play a pivotal role in society’s transition towards it. The average cost of the Model 3 is decreasing, thus increasing its affordability. This marks a positive signal as widespread adoption often above all requires feasibility for the masses.
As governments worldwide continue to bolster their arsenal in combating climate change, it catalyzes the demand for both electric vehicles and Tesla shares. With short seller activity beginning to subside, Tesla’s official kickoff in the S&P 500 next month could be the next chapter for Elon Musk & Co.
Where does this data come from?
Source: Asset Dash and Barchart.com.
Notes: Financial data is as of November 25th, 2020
Source: https://www.visualcapitalist.com/tesla-set-to-become-a-top-10-company-in-the-sp-500/
