Tesla Inc. (TSLA) - Get Report shares slumped lower heading into its S&P 500 debut Monday following a record year for the clean energy carmaker that has added more than half a trillion dollars to its market value.
Tesla will enter the S&P 500 as the benchmark's fifth biggest stock, with a weighting of 1.69% and a market value of around $650 billion following Friday's record high close of $695.00 per share. Tesla will be the biggest inclusion to the S&P 500 on record, sitting just ahead of Warren Buffett's Berkshire Hathaway (BRK.B) - Get Report and around $200 billion below Facebook (FB) - Get Report on the main U.S. benchmark.
Around 200 million in Tesla shares changed hands Friday, around 11 times more than its daily average of $18 million, as passive fund mangers that track benchmark indices added the clean-energy carmaker to their portfolio.
Tesla shares were marked 4.75% lower in early trading, against a 1% decline for the S&P 500, to change hands at $662.80 each. Tesla began the year trading at $84.00 per share with a market value of around $75.5 billion.
Tesla gained inclusion to the benchmark after stringing together four consecutive quarters of profit -- no small feat in a car market that has been decimated by the global coronavirus pandemic -- may be on track to meet its 2020 target of 500,000 car sales, a figure that would require fourth quarter deliveries of 166,000, after solid sales from China, the world's biggest EV market.
Tesla shares have risen nearly 700% so far this year as Elon Musk's clean-energy carmaker posted consecutive quarterly profits, rolled out manufacturing bases in China and extended its commanding share of the electric vehicle market.
"We believe Tesla is tracking to another strong month of December in China which could be the tipping point to get Musk & Co. to hit/exceed its 500k annual delivery target, an achievement not even on the map for the Street going back to the late spring/summer timeframe," said Wedbush analyst Dan Ives, who lifted his price target on the group by $155 to $715 per share.
"For 2021, we are currently modeling 710k annual deliveries which would represent 40%+ growth and put Tesla on a strong growth trajectory into 2022," he added. "Clearly, competition is increasing across the board on the EV front with a slew of domestic players in China, Europe, and the US going after Tesla's core EV stronghold, although we believe the market is growing at a brisk rate that will yield multiple winners going after the EV jackpot."
At the same time, however, it's also been Wall Street's most shorted stock, with analysts questioning its sky-high valuation and relatively low profit margins while betting billions against its meteoric rise.
Not that this has been a winning strategy; analysts at S3 estimate short sellers of Tesla stock have lost more than $30 billion this year alone, with around a fifth of that total coming from the November 16 decision to add the stock to the S&P 500 starting from Monday.