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Tech giant Tesla Inc made its S&P 500 debut. This comes at a time when a new, more infectious strain of the coronavirus is shaking markets globally.
Palo Alto-based tech company Tesla Inc (NASDAQ: TSLA) made its first appearance on the S&P 500 on Monday 21 December. Stocks went on to crumble by 5.1% in the morning. This is an indication that investors pulled out following the company’s highly anticipated addition to the index. However, the stock closed yesterday with a 6.49% fall, at $649.86.
Tesla, the stock of which is currently at the level of $650 and the market cap is around $616 billion, is S&P 500’s fifth-largest member. It amounts to about 1.69% of the S&P 500 index. This translates into a 1 point move on the index for every $11.11 shift in Tesla shares.
Tesla Makes S&P Debut as New Covid-19 Strain Shakes Markets
A new strain of the coronavirus has been detected in recent days. Believed to be 70% more transmittable, the new strain is already making waves. Downing Street, in a weekend press conference, announced that there will be strict measures over the holiday season to curtail the spread of this new strain. European and Asian markets were hard hit as widespread panic over this new strain resulted in a tumble for risk-sensitive assets.
In spite of the poor performance, Tesla’s long-term appears bullish. Dan Ives, Managing Director and analyst at Wedbush Securities opined that Tesla’s addition to the index was a “clear validation of the company’s profitability trajectory looking ahead”. Bar Tesla stock trading close to $650, lower that his revised $715 per-share-target, Ives believes Tesla stock has the ability to reach the $1000 per share mark.
Ives is certain that we are in a ” golden age for EV” and that Tesla joining the S&P index is a boost in credibility not just for itself, but for the entire electric vehicle industry. He said:
“It’s a feather in the cap for Musk and Tesla to get this. Not just in terms of getting into the S&P 500 and what it means from an institutional ownership and indexing […] That shot of credibility — I think it shows how far we’ve come in the last few years especially in the EV market”
In a 12-month period, the EV company’s stock has increased by over 700%. S&P 500 and Nasdaq recorded gains of 14% and 40% respectively over the same time period
The EV industry has seen substantial growth during the Covid-19 pandemic. Chinese start-ups Xpeng Inc (NYSE: XPEV) and Li Auto Inc (NASDAQ: LI) and Tesla’s latest rivals.