Tesla stock (NASDAQ:TSLA) is currently on a tear, hitting new all-time highs on Tuesday and trading up 6% amid the company’s final end of quarter sprint. As sentiments seemingly improve about Tesla’s Q2 results, it appears that the company potential inclusion to the S&P 500 may be at hand.
Tesla stock has exhibited strength this June, with the company at one point becoming the most valuable automaker by market cap, beating Japanese automotive juggernaut Toyota. Tesla recently celebrated the 10th year anniversary of its IPO as well, and it did so by ending the day trading beyond $1,000 per share.
Tesla’s momentum may partly be due to recent reports and estimates suggesting that the electric car maker may deliver more vehicles than initially expected this quarter. This was despite the company’s primary electric car production factory, the Fremont plant, being closed for seven weeks in Q2 due to the onset of the coronavirus.
Wall Street has exhibited some bullish tendencies towards the electric car maker. Just last week, for example, Deutsche Bank analyst Emmanuel Rosner stated that he estimates Tesla’s production numbers to be in the mid 70k range, which was more optimistic than the buy side consensus then, which was listed in the mid 60s.
Elon Musk, for his part, has also rallied the troops for a final, strong push to end the quarter strong. As indicated by a leaked email to Tesla employees that was viewed by Reuters, Musk stated that the company actually has a shot at breaking even this Q2. “Breaking even is looking super tight. Really makes a difference for every car you build and deliver. Please go all out to ensure victory!” He wrote.
If Tesla could meet or exceed production and delivery estimates, and if the company posts even a small profit this quarter, it may very well have a fighting chance at being included in the S&P 500. To qualify for the S&P 500, companies must post a cumulative profit over its previous four quarters, with its most recent quarter showing a profit.
Tesla has reported a net profit in the past three quarters so far, with the company posting $143 million in Q3 2019, $105 million in Q4 2019, and $16 million in Q1 2020. This means that even a small profit in Q2 2020 could push the company to the S&P 500. Otherwise, Tesla would have to wait for its third quarter results this year to qualify once for S&P 500 eligibility once more.
The next few days will likely provide more clues if Tesla’s momentum is poised to get stronger.
As of writing, Tesla stock is trading 6.60% at $1,075.06 per share.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.
