TSLA: Tesla Gets Added to The S& P500

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Tesla (TSLA) is a one-of-a-kind electric vehicle company listed on the NASDAQ stock exchange. Right now, it has been announced that the stock will be added to the S & P500. In this review, we’ll look at the fundamentals of the company, as well as what this news means for Tesla.

Some of the information in this post is based on the analysis I wrote in March.

S & P500 requirements

  • There are certain requirements that a company must meet to be added to the S & P500.
  • The company must be a US company
  • Must have a market capitalization of at least $ 8.2 billion
  • It must be very liquid
  • It must have a public float of at least 50% of its outstanding shares
  • Earnings for the most recent quarter and the sum of earnings for the four consecutive quarters of the last four quarters should be positive.

Tesla had a hard time meeting the last part of the requirement as it did not make a profit for a while. They showed increased revenue, but much of their profits were reinvested in infrastructure / gigafactory construction and R&D.

Fundamental analysis

  • Despite the Corona virus (COVID-19), Tesla has managed to manufacture and deliver a record number of vehicles by 2020
  • Tesla ended 2019 with $ 6 billion and, earlier this year, raised an additional $ 2 billion through the stock offering.
  • This indicates that Tesla had enough money to support the chaos caused by the viral outbreak.
  • Tesla is one of the biggest beneficiaries of zero emission vehicle (ZEV) credit regulations, racking up huge ZEV credits that other auto companies pay billions to buy.
  • In March 2020, Tesla captured 25% of the Chinese EV market, and further dominance is anticipated in possibly one of the most important markets.
  • Given that Biden’s election victory is almost certain, Tesla is expected to benefit greatly from Biden’s green policies.

Arguments against Tesla

  • Tesla has a negative earnings per share (EPS). Negative earnings are a red flag for value investors
  • Tesla’s operating margin is possibly too low and not enough to be profitable in the long term.
  • Tesla’s debt-to-equity ratio is quite high and is cause for concern as it suggests that Tesla is a riskier investment.
  • While Tesla’s gross revenue growth over the past three years has been excellent, these numbers are not sustainable.
  • There are arguments against the management of Tesla; some argue that Elon Musk gave himself too large a compensation package
  • This worries investors, as the company has not yet made annual profits.
  • Most of the arguments against Tesla have to do with its rather questionable finances, which have now proven strong by joining the S & P500.

Future projections

  • While the electric vehicle (EV) market continues to grow, Tesla’s market share remains at 17 ~ 18% of a rapidly growing industry.
  • Tesla’s Giga factories have shown unprecedented progress in terms of how quickly the factory was built, as well as the automated manufacturing process.
  • Tesla has billions of miles of autonomous driving data, which is more data than any other player in the autonomous vehicle market.
  • Based on a large amount of data, Tesla’s autonomous cars will allow the company to generate margins similar to that of a software company.
  • Tesla has better battery efficiency compared to combustion engine cars and can still benefit from economies of scale
  • According to electric vehicle experts, Tesla vehicles are at least 4-5 years more advanced than those of its competitors.

Technical analysis

  • We can look at the daily chart to get information about technical analysis.
  • Tesla is known to ignore many of the technical signals that appear on the chart.
  • As it is more driven by news and fundamental developments, it is better to just refer to the technical aspect.
  • We can see a clear uptrend marked by the Ichimoku cloud support
  • Prices trading above the 100 Simple Moving Average (SMA) is a bullish signal
  • We can see that we have never broken below the 200 SMA since November 2019
  • As we consolidate into a bullish pennant pattern, bullish news is likely to trigger a breakout near the apex of the pattern.


In short, Tesla is not for the mid-value investor looking to buy stocks at an undervalued price. However, it is for investors who know how to value the company for future expectations. I think Tesla is a company

About the author

Nafees Saifi // entrepreneur, author, trainer, and stocks and FX trader. 
Nafees Saifi is a professional FX trader from, India. Nafees has extensive experience trading commodities, bonds, and equity futures in the Asian, European, and US markets. Nafees holds a Bachelor of Finance and Economics degree and is focused heavily on Investment Finance and Quantitative Analysis.


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