Tesla Inc. (TSLA) – Get Report founder and CEO Elon Musk could steer his company onto the S&P 500 later this year, and justify one of the most electrifying moves in U.S. market history, if the clean-energy carmaker can post a quarterly profit after the close of trading Wednesday.
Tesla will clear a significant hurdle towards its inclusion on the benchmark if its able to publish a GAAP profit for the second quarter after the close of trading Wednesday, a figure that would mark four consecutive quarters in the black for the Palo Alto, California-based carmaker.
The company took a giant step towards that goal last week when its reported stronger-than-expected quarterly deliveries of 90,650 units, a figure that topped Street forecasts even amid a six week shutdown of the carmaker’s Freemont, California production facility and a sharp 34% decline in overall U.S. auto sales.
Analysts are split as to whether Tesla can make the leap this fallT, however, with second quarter estimates ranging from an adjusted loss of $2.53 per share to a profit of $1.79 per share. Revenue forecasts run the gamut between $2.8 billion and $6.2 billion.
Tesla shares were marked 3% higher in early Wednesday to change hands at $1,613.00 each, a move that would extend the stock’s year-to-date gain past 280%.
Tesla, which assumed the mantle of the world’s most-valuable carmaker last month despite its modest — less than 1% — contribution to total global sales, will sell, at most, 500,00 cars this year. Ford Motor Co. (F) – Get Report, which has a market value that is ten times less, will likely shift 2.2 million vehicles and Toyota Motor Co. (TM) – Get Report, with a market value of $205 billion, will sell 10.7 million.
Tesla, in fact, added nearly twice the value of Ford and General Motors (GM) – Get Report combined to its own stock price this month alone, with a 50% gain that’s tacked some $90 billion onto its market cap.
Credit Suisse analysts suggest the S&P 500 inclusion could trigger even more activity in Tesla stock, with ‘significant’ incremental buying of around 18 million shares — some 10% of its outstanding total — from passive investors and fund managers that track the benchmark index.
The bank noted, however, that S&P Dow Jones committee members might struggle to accommodate Tesla’s bulk: with a market cap of $300 billion, adding it to the index presents a challenge not seen since Facebook Inc. (FB) – Get Report was squeezed onto the index in 2013 with a market cap of $120 billion. The committee is set to re-balance the index on September 21, but normally updates investors on new entrants a week four trading prior to the re-set.
Should Tesla gain entry into the S&P 500, its market value would sit just below that of Procter & Gamble (PG) – Get Report and Mastercard (MA) – Get Report, placing it just outside the benchmark’s top ten, comprising around 1.15% of the benchmark’s $25.24 trillion total market capitalization.
Musk, who co-founded Tesla in 2004 with a $6.5 million investment, will still be inline for another annual windfall even if S&P Dow Jones defers its decision until 2021.
Tesla shares have averaged a market cap of $150 billion for the first six months of the year, triggering the vesting of stock options awarded to Musk in 2018 — the right to buy 1.69 million shares at $350.02 each — that are now worth $2.1 billion.