Tesla will officially start trading on the broad market index starting Dec. 21.
David Trainer, CEO of investment research firm New Constructs and a Tesla bear, told TheStreet that Tesla's addition "brings huge downside risk to the S&P 500 that may damage the popular passive index."
Tesla shares were up 8.75% to $443.79 on Tuesday.
Here's what Wall Street is saying:
Wedbush (Neutral rating, $500 PT unchanged)
Taking a step back, this is a major feather in the cap for the Tesla bulls after much agonizing around not getting into the S&P 500 in early September. We believe the sustained profitability trajectory as evidenced in the September quarter was the final straw that got Musk & Co. into the S&P 500 this time around despite all the noise around tax credit boosts on the Street. Clearly, this is a key positive for shares and indexing purposes and ultimately removes another question mark around the Tesla story going forward.
- Daniel Ives
JMP Securities (Outperform rating, $516 PT unchanged)
The news (Monday that Tesla will be added to the S&P 500 will of course likely drive a rally in the stock today. The question to be asked, in our opinion, is what a reasonable valuation analysis suggests TSLA is worth. We recently suggested valuing TSLA at 6x revenue and 30x EBITDA, using 2025 estimates and discounting the results back to the present at 8% per year. We stand by that analysis, which results in a price target of $516 and supports our Market Outperform rating.
- Joseph Osha
Credit Suisse (Neutral rating, $400 PT unchanged)
Despite an impressive Battery Day (with many viewing the introduction of the 4680 a cell as a significant step forward), and despite a strong 3Q result (highlighted by robust gross margin), Tesla stock has been challenged in the past month. While positive fundamentals could help Tesla, we are reminded that arguably the larger driver of strength in Tesla stock is a broader risk-on environment for growth stories.
- Dan Levy