Tesla’s meteoric stock rise has drawn skepticism from some investors, who have worried that its hefty valuation doesn’t reflect the huge challenges it still faces. A struggling Toyota still expects to sell 9.4 million vehicles in its current fiscal year, while Tesla is targeting 500,000 deliveries.
But Tesla’s addition to the S&P 500 is a clear marker of just how far the company has come.
“Taking a step back, this is a major feather in the cap for the Tesla bull,” Wedbush Securities analyst Dan Ives said in a note to clients.
Last quarter, buoyed by strong demand for the more affordable Model 3 and the early success of Tesla’s Gigafactory in Shanghai, the company booked record profits and delivered more cars than ever before. Ives said this made it impossible for S&P Dow Jones Indices to keep Tesla out of the benchmark index much longer.
What happens next: Shares may be added to the index in two separate tranches in order to minimize disruption, per S&P Dow Jones Indices. The company had a market valuation of nearly $387 billion as of Monday’s close.
Once it joins the S&P 500, the company will attract large groups of new investors, according to Nick Hyett, senior equity analyst at Hargreaves Lansdown.
Previously, Tesla’s investor base largely consisted of active fund managers who bought into the company’s mission, Hyett told me. Now, passive fund managers in charge of portfolios that mirror the S&P 500 won’t have much choice but to get in on the action.
“Most passive funds [that track the index] will be essentially compelled to buy the stock,” Hyett said. Otherwise, they’ll have to answer to inquiring clients.
Vaccine frenzy sends stocks to record highs
Excitement about Covid-19 vaccines that could help facilitate a return to normal life has sent stocks rocketing to all-time highs.
The latest: The Dow and S&P 500 closed at records levels on Monday after Moderna said its experimental coronavirus vaccine is highly effective. Pfizer made a similar announcement about its vaccine candidate last week.
The Dow is now just 50 points shy of 30,000 points, a psychologically significant level for market bulls.
Pfizer’s vaccine has to be kept at minus 75 degrees Celsius. No other vaccine in the United States needs to stay that cold, and doctors’ offices and pharmacies don’t have freezers that go that low. But Moderna’s vaccine can be kept at just minus 20 degrees Celsius. The company also said it can be kept for 30 days in the refrigerator. Pfizer’s vaccine can last only five days in the fridge.
“Last week’s Pfizer news was great, but today’s Moderna vaccine news is even better,” said Ryan Detrick, chief market strategist for LPL Financial. “Being able to store the vaccine in a standard fridge for up to a month makes transportation and usability so much easier.”
How Airbnb turned a profit last quarter
Despite a pandemic that’s dealt a big blow to its business, Airbnb managed to make money last quarter.
“Domestic travel quickly rebounded on Airbnb around the world as millions of guests took trips closer to home,” the company said in its filing. “Stays of longer than a few days started increasing as work-from-home became work-from-any-home on Airbnb.”
The company still had a difficult start to 2020, reporting net losses of $916 million through June 30. The fourth quarter could also be difficult as another wave of infections takes hold in many of its key markets.
Despite the tough operating environment, Airbnb’s public offering is highly anticipated among investors. The company is one of the most valuable private startups in the world, at one point notching a valuation of $31 billion.
- US retail sales data for October arrives at 8:30 a.m. ET. Industrial production data follows at 9:15 a.m. ET.
- Representatives from OPEC and its allies meet to discuss whether to extend production cuts into next year as demand for crude stays soft.