It took months, but Tesla has finally managed to enter the S&P 500 index of major US stocks, cementing its position as one of the world's leading auto makers. Following the announcement on Monday, shares were up 13% in after hours trading. The question everyone is asking now is: how will the title react in the coming months?
Tesla will officially enter the index on December 21st
The S&P 500 Index Board announced on Monday evening the inclusion of Tesla (Tesla shares with ticker: TSLA), specifying that the stock will officially enter the index on 21 December. The good news comes after the disappointment in September, when the company's request was not accepted by the index commission.
It was early September when Tesla stock was trading at $ 418. Shortly after the commission pushed back, the stock hit $ 330 but recovered all losses over the next five days. Now that the inclusion of the stock has been officially announced, investors will need to consider what kind of price action they can expect in the coming weeks.
How will the TSLA stock react?
Tesla Bulls argue that indexing has created more demand for the stock. After all, there are about $ 12 trillion in index-linked mutual funds at the S&P 500. Very roughly, $ 100 billion in Tesla stock will have to be bought from the index funds.
This means high demand for a few trading days. But other market experts argue that any price increases due to indexation are temporary. After purchasing the index funds, trading volumes will return to normal.
Understanding exactly what will happen is difficult. Traders may expect Tesla shares to hit a yearly high again. But there is more data to look into to estimate short-term trading levels.
In September, the main price target by Jefferies analyst Philippe Jean Houchois of a large brokerage firm was $ 500. Now, New Street Research analyst Pierre Ferragu's main price target is $ 578.
In both cases, however, these are just assumptions that are in no way tied to the fundamental data of the automotive sector. There is no reason why a stock should hit the target price of a famous analyst, but traders will always be looking for clues to the impending future.
In December, Tesla will enter the Index as the most valuable automobile manufacturer in the world. Additionally, it is expected to be the ninth or tenth most valuable company in the S&P 500, after Walmart (WMT) or Visa (V), Ford Motor (F) and General Motors (GM) are the other two auto makers in the S&P 500. , Tesla shares were up about 390%, as of Monday's closing price.
