It's been a long time, but Tesla (TSLA) has finally done it! One of 2020's ‘trendiest' stocks has solidified its spot amongst blue-chip equities as it takes its place in the illustrious S&P 500. This pipedream automotive start-up has become the lead driver of the shift towards electric vehicles (EV).
Elon Musk's brainchild had once been notorious for overpromising and underdelivering. Tesla has completely flipped the narrative since its cash-flow crisis last summer. Elon's seemingly overzealous promises are finally being met, and Wall Street has noticed in a big way.
Elon is delivering the goods with an advancing global EV empire that even Alexander the Great would envy.
Today Tesla is the most valuable automotive company on the planet and is poised to make up close to 1.5% of the S&P 500. TSLA is positioned to be the 8th most valuable enterprise on the world's equity benchmark when it joins the ranks on December 17th.
What This Means For TSLA
The S&P 500 vindication is the icing on the cake of an already banner year for Elon Musk and his EV giant. To be included in this large-cap benchmark, an enterprise must prove 4 consecutive quarters of profitability, and Musk easily demonstrated 5. Tesla's years of losing money are finally behind it, and analysts estimate an accelerating bottom-line for years to come.
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TSLA is booming today on this much-awaited news, surging over 12% on open as the rest of the market sell-off.
Tesla fanboys can finally say I told you so as every S&P 500 tracking fund gears up to add this growth machine to its holdings. ETFs, mutual funds, and other S&P 500 tracking instruments will be driving a bid for this stock over the next month.
Where We Are Headed
We are headed towards sustainability because it's good for the Earth… and it is quite profitable. This pandemic has society, and the economy focused on implementing sustainable practices as we look to the future. Tesla is the world's sustainability play in transportation.
In the face of a global pandemic and economic recession, Tesla was able to deliver a record number of EVs. The enterprise is looking at a lustrous road ahead, and every quarter TSLA's seemingly lofty valuation is further justified.
With Gigafactories in the US and China, while a Berlin plant expects to start production next summer, the swelling global demand for these computers on wheels is being met with ample supply.
TSLA shares are up 420% (coincidentally enough) since this crazy year commenced, and some of the most bullish analysts have price targets that are over 30% above what the stock is currently trading at. The true value of this EV powerhouse is a very polarizing topic amongst analysts.
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Tesla, Inc. Price, Consensus and EPS Surprise
(source: zacks.com)
This long-term low-interest-rate environment has made high growth businesses like Tesla more valuable than ever before as more weight is given to estimated earnings years into the future. Simultaneously, this makes the higher valuation much more ambiguous as it is challenging to accurately estimate earnings that are 5 or even 2 years out because of the excessive level of uncertainty. Therefore, leading to the polarizing opinions over TSLA's intrinsic value today.
Final Thoughts
Tesla's addition to the S&P 500 was a big feather in the cap of a fantastic year for the enterprise and its shareholders. Tesla has solidified its positioning in the 4th Industrial Revolution and will be a big player in the Roaring 20s as it continues to develop cutting-edge electric and autonomous vehicles.
I'm not chasing this rally, but I will be holding on to my current TSLA shares.
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