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Tesla's S&P 500 Inclusion Will Help Index Catch Up With Nasdaq 100, Analysts Say

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Tesla's S&P 500 Inclusion Will Help Index Catch Up With Nasdaq 100, Analysts Say

Tesla Inc’s (NASDAQ: TSLA) inclusion in the S&P 500 index could help it catch up with the Nasdaq 100, according to analysts.

What Happened: Brian Freitas, an analyst at Smartkarma, told Bloomberg that Tesla’s addition “will help the S&P Index to reduce its lag versus other gauges such as Nasdaq 100 Index.”

Buying from funds that track the S&P 500 could lead to a bout of share buying. Freitas estimates passive money would need to purchase $58 billion in stocks.

Wedbush Securities analyst Daniel Ives reportedly called the inclusion of Tesla “a key positive for shares and indexing purposes.”

The inclusion of the Elon Musk-led automaker in the index could help boost stocks already enjoying a boost from news surrounding the COVID-19 vaccine and election results, Bloomberg noted.

Why It Matters:

While the S&P 500 is up nearly 12% year-to-date, the Nasdaq 100 has run up almost 38% driven higher by the 388% increase in Tesla’s share price.

The inclusion of Tesla in the S&P 500 comes after months and months of speculation and will take effect before the opening of trade on Dec. 21. 

The weightage of the automaker means that a special two-step entry is needed, Bloomberg noted.

The stock is likely to be among the top 10 largest stocks on the index. The company that will be displaced as a result of Tesla's entry is yet to be determined. 

Price Action: Tesla shares shot up 13.19% to $461.92 in the after-hours session on Monday after closing 0.1% lower.

Latest Ratings for TSLA

DateFirmActionFromTo
Jan 2021WedbushMaintainsNeutral
Jan 2021Edward JonesInitiates Coverage OnHold
Jan 2021Credit SuisseMaintainsNeutral

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