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Tesla’s (TSLA) massive valuation could make S&P 500 inclusion complicated

The next-generation Tesla Roadster at the Grand Basel Auto Show

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Tesla (NASDAQ: TSLA) is set to join the S&P 500 on December 21st, making it one of the newest members of the world’s most influential stock index. However, Tesla’s gigantic market capitalization, which has made it the most valuable car company globally, could make the inclusion process slightly more complicated than initially planned.

Tesla’s over $423 billion market cap will make it the largest company ever to be added to the S&P 500 Index. Putting the entire company into the new benchmark would force index-tracking funds to sell upwards of $40 billion in stock to make room for the electric car company. Because of this, the S&P’s overseer and consultant, the S&P Dow Jones Indices, is considering the option of adding Tesla to the index in phases or tranches.

After being snubbed from the index in early September, Tesla is finally getting its shot to join the S&P. But while the company is experiencing an over 400% growth in share price so far this year, adding Tesla in more than one phase seems to be the more favorable scenario. However, the S&P Dow Jones Indices will seek out feedback from investors, questioning them on which strategy is more appealing to them: adding TSLA all at once or in several chunks. It is unknown which companies will be replaced by Tesla, but the S&P plans to name them later.

Tesla (TSLA) to join S&P 500 December 21st

Howard Silverblatt, a Senior Index Analyst at S&P Dow Jones, stated that the decision to add the electric automaker wasn’t a simple one, especially considering the magnitude of Tesla’s inclusion. “It wasn’t easy to make such an important decision, and this decision has a big impact,” he said. Silverblatt added that getting insight from investors will assist in the decision-making process.

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“An open-ended dialog with investors will only help. You can’t put a company in at such a high level just like you would any other firm. The times have changed, the magnitude of the stocks that are being added has changed, too,” he added.

Tesla will end up likely being one of the top 10 largest stocks in the S&P when it joins the index on December 21st, Bloomberg reported. Estimating that it will fall in between Johnson & Johnson and Procter & Gamble Co., Tesla’s valuation would be the equivalent of the 60 smallest stocks in the benchmark. However, S&P Dow Jones uses a float-adjusted market-cap to determine the weight instead of the straight figure.

When the S&P 500 is reshuffled, which happens on a quarterly basis to rebalance the index, changes occur due to fluctuations in a company’s size. Depending on growth or a reduction of size, some stocks may move from the S&P’s small-cap index to the large-cap, or vice versa.

In Tesla’s circumstance, no company that will be removed is large enough to offset the automaker’s inclusion into the S&P 500. This is why the index’s overseer is considering adding the company in more than one tranche.

Lawrence Creatura, a portfolio manager at PRSPCTV Capital LLC, told Bloomberg that this is effectively “trading a pawn on the chessboard for a queen.”

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“The size of Tesla as it’s being included in the index is much larger relative to the company that is likely to come out. That’s going to create a lot of shuffling among passive funds that track the S&P 500 explicitly,” Creatura also said.

On the news that TSLA would join the S&P on Monday evening, shares of the automaker’s stock spiked over 13% in after-hours trading. At the time of writing, TSLA shares were trading at $444.10, up over 9%.

After finally attaining the four consecutive profitable quarter threshold required to join the index, Tesla is riding a strong stream of momentum heading into the end of 2020. In its most successful year as a company yet, Tesla plans to close out 2020 with a bang by accomplishing its 500,000 vehicle delivery mark, which was set at the beginning of the year before the COVID-19 pandemic began. With increased production and growing demand, Tesla could reach a one million car a year production and delivery rate, surging the popularity and adoption of electric cars and phasing out the use of petrol-powered engines.

Disclaimer: Joey Klender is a TSLA Shareholder.

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Joey has been a journalist covering electric mobility at TESLARATI since August 2019. In his spare time, Joey is playing golf, watching MMA, or cheering on any of his favorite sports teams, including the Baltimore Ravens and Orioles, Miami Heat, Washington Capitals, and Penn State Nittany Lions. You can get in touch with joey at joey@teslarati.com. He is also on X @KlenderJoey. If you're looking for great Tesla accessories, check out shop.teslarati.com

Investor's Corner

Stifel raises Tesla price target by 9.8% over FSD, Robotaxi advancements

Stifel also maintained a “Buy” rating for the electric vehicle maker.

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Credit: Tesla China

Investment firm Stifel has raised its price target for Tesla (NASDAQ:TSLA) shares to $483 from $440 over increased confidence in the company’s self-driving and Robotaxi programs. The new price target suggests an 11.5% upside from Tesla’s closing price on Tuesday.

Stifel also maintained a “Buy” rating despite acknowledging that Tesla’s timeline for fully unsupervised driving may be ambitious.

Building confidence

In a note to clients, Stifel stated that it believes “Tesla is making progress with modest advancements in its Robotaxi network and FSD,” as noted in a report from Investing.com. The firm expects unsupervised FSD to become available for personal use in the U.S. by the end of 2025, with a wider ride-hailing rollout potentially covering half of the U.S. population by year-end.

Stifel also noted that Tesla’s Robotaxi fleet could expand from “tiny to gigantic” within a short time frame, possibly making a material financial impact to the company by late 2026. The firm views Tesla’s vision-based approach to autonomy as central to this long-term growth, suggesting that continued advancements could unlock new revenue streams across both consumer and mobility sectors.

https://twitter.com/AIStockSavvy/status/1975893527344345556

Tesla’s FSD goals still ambitious

While Stifel’s tone remains optimistic, the firm’s analysts acknowledged that Tesla’s aggressive autonomy timeline may face execution challenges. The note described the 2025 unsupervised FSD target as “a stretch,” though still achievable in the medium term.

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“We believe Tesla is making progress with modest advancements in its Robotaxi network and FSD. The company has high expectations for its camera-based approach including; 1) Unsupervised FSD to be available for personal use in the United States by year-end 2025, which appears to be a stretch but seems more likely in the medium term; 2) that it will ‘probably have ride hailing in probably half of the populations of the U.S. by the end of the year’,” the firm noted.

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Investor's Corner

Cantor Fitzgerald reaffirms bullish view on Tesla after record Q3 deliveries

The firm reiterated its Overweight rating and $355 price target.

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(Credit: Tesla)

Cantor Fitzgerald is maintaining its bullish outlook on Tesla (NASDAQ:TSLA) following the company’s record-breaking third quarter of 2025. 

The firm reiterated its Overweight rating and $355 price target, citing strong delivery results driven by a rush of consumer purchases ahead of the end of the federal tax credit on September 30.

On Tesla’s vehicle deliveries in Q3 2025

During the third quarter of 2025, Tesla delivered a total of 497,099 vehicles, significantly beating analyst expectations of 443,079 vehicles. As per Cantor Fitzgerald, this was likely affected by customers rushing at the end of Q3 to purchase an EV due to the end of the federal tax credit, as noted in an Investing.com report. 

“On 10/2, TSLA pre-announced that it delivered 497,099 vehicles in 3Q25 (its highest quarterly delivery in company history), significantly above Company consensus of 443,079, and above 384,122 in 2Q25. This was due primarily to a ‘push forward effect’ from consumers who rushed to purchase or lease EVs ahead of the $7,500 EV tax credit expiring on 9/30,” the firm wrote in its note.

A bright spot in Tesla Energy

Cantor Fitzgerald also highlighted that while Tesla’s full-year production and deliveries would likely fall short of 2024’s 1.8 million total, Tesla’s energy storage business remains a bright spot in the company’s results.

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“Tesla also announced that it had deployed 12.5 GWh of energy storage products in 3Q25, its highest in company history vs. our estimate/Visible Alpha consensus of 11.5/10.9 GWh (and vs. ~6.9 GWh in 3Q24). Tesla’s Energy Storage has now deployed more products YTD than all of last year, which is encouraging. We expect Energy Storage revenue to surpass $12B this year, and to account for ~15% of total revenue,” the firm stated. 

Tesla’s strong Q3 results have helped lift its market capitalization to $1.47 trillion as of writing. The company also teased a new product reveal on X set for October 7, which the firm stated could serve as another near-term catalyst.

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Investor's Corner

Tesla just got a weird price target boost from a notable bear

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Credit: Tesla Manufacturing

Tesla stock (NASDAQ: TSLA) just got a weird price target boost from a notable bear just a day after it announced its strongest quarter in terms of vehicle deliveries and energy deployments.

JPMorgan raised its price target on Tesla shares from $115 to $150. It maintained its ‘Underweight’ rating on the stock.

Despite Tesla reporting 497,099 deliveries, about 12 percent above the 443,000 anticipated from the consensus, JPMorgan is still skeptical that the company can keep up its momentum, stating most of its Q3 strength came from leaning on the removal of the $7,500 EV tax credit, which expired on September 30.

Tesla hits record vehicle deliveries and energy deployments in Q3 2025

The firm said Tesla benefited from a “temporary stronger-than-expected industry-wide pull-forward” as the tax credit expired. It is no secret that consumers flocked to the company this past quarter to take advantage of the credit.

The bump will need to be solidified as the start of a continuing trend of strong vehicle deliveries, the firm said in a note to investors. Analysts said that one quarter of strength was “too soon to declare Tesla as having sustainably returned to growth in its core business.”

JPMorgan does not anticipate Tesla having strong showings with vehicle deliveries after Q4.

There are two distinct things that stick out with this note: the first is the lack of recognition of other parts of Tesla’s business, and the confusion that surrounds future quarters.

JPMorgan did not identify Tesla’s strength in autonomy, energy storage, or robotics, with autonomy and robotics being the main focuses of the company’s future. Tesla’s Full Self-Driving and Robotaxi efforts are incredibly relevant and drive more impact moving forward than vehicle deliveries.

Additionally, the confusion surrounding future delivery numbers in quarters past Q3 is evident.

Will Tesla thrive without the EV tax credit? Five reasons why they might

Tesla will receive some assistance from deliveries of vehicles that will reach customers in Q4, but will still qualify for the credit under the IRS’s revised rules. It will also likely introduce an affordable model this quarter, which should have a drastic impact on deliveries depending on pricing.

Tesla shares are trading at $422.40 at 2:35 p.m. on the East Coast.

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