Tesla on Tuesday recorded it’s fourth straight profitable quarter, reporting earnings of $104 million on revenue of $6.036 billion.
With the year-long profitable streak, Tesla has opened the door to being added to the S&P 500 index, a move that could provide a major boost to share prices.
What is the S&P 500?
The S&P 500 is a market capitalization weighted index that tracks the stocks of 500 of the largest publicly traded US companies. It is an important index because it is considered a leading indicator of how the US economy is performing. and by extension the overall stock market.
How to qualify for the S&P 500?
The following conditions must be met in order to qualify for inclusion into the index (via S&PGlobal):
- company is based in the US (Tesla – check)
- have an unadjusted market cap of at least $8.2 billion (Tesla – check)
- be listed on the New York Stock Exchange (NYSE), NASDAQ, or Cboe (Tesla – check)
- stock price of at least $1 (Tesla – check)
- record four consecutive profitable quarters (Tesla – check)
Will Tesla be added to the S&P 500?
Every quarter, a committee selects each of the index’s 500 listings based on their liquidity, size, and also industry. Even though Tesla checks off all the requirements above, it does not guarantee it will be added to the index.
The next time the committee meets is on September 18, 2020, so investors will have to wait until at least then to officially find out.
If it does happen, which Drive Tesla thinks it will, there is a good chance TSLA share prices will increase as index funds and institutional investors will want to purchase the stock to continue tracking the index.
