Tesla (TSLA – Free Report) could become a member of the S&P 500 Index in the second quarter of next year if it manages to show sustained profitability over trailing 12 months, according to one analyst at Macquarie.
Per Macquarie, Tesla fulfills all the S&P 500’s requirements except the one that calls for four quarters of positive GAAP earnings. The analyst believes that the electric maker will hit this milestone in the second quarter of next year. This is likely to be driven by steady demand for Model S and Model X, increased production and the potential for zero-emission vehicle credit revenues.
Tesla reported its third-ever quarterly profit last month and reaffirmed its forecast for profit and positive free cash flow for the fourth quarter. The company posted a surprise profit of $2.90 per share in the third quarter of 2018 against the Zacks Consensus Estimate of a loss of 55 cents. This compares with loss of $2.92 per share a year ago and represents the third quarterly profit in the company’s 15-year history.
Revenues of $6.82 billion beat the Zacks Consensus Estimate of $5.67 billion and grew 128% year over year. Notably, Q3 was a truly historic quarter for Tesla with Model 3 being the best-selling car in the United States in terms of revenues and the fifth best-selling car in terms of volume.
Tesla’s inclusion in the S&P 500 will be good news for its shareholders as well as the stock. Companies added to the S&P 500 for the first time have seen an average 6.9% price increase on the day of announcement versus the average 0.2% increase of the S&P 500. Additionally, its inclusion will attract new investors to the company, who would indirectly purchase the company through financial products invested in the S&P 500.
Given this, investors could tap the opportune moment with the help of the following ETFs having substantial allocation to the luxury carmaker. Tesla sports a Zacks Rank #1 (Strong Buy) and has a Growth Score of B. Additionally, it belongs to a top-ranked industry (top 4%), suggesting good tidings for the stock.
