Markets swooned on Monday, tracking declines in European and Asian equities as concerns mounted over aÂ new infectious strain of the coronavirus identified in the UK. The move drove all risk-sensitive assets lower in early dealings.
Nevertheless, the longer-term sentiment on Tesla remains bullish, even as the stock shed $35 to trade near $658. The number of shares currently held in a short position has hit a record low for 2020, according to data from Ortex Analytics, and Wall Street is broadly encouraged by the companyâ€™s outlook for next year.
â€œIts a feather in the cap for Musk and Tesla to get this,â€ Dan Ives, managing of Wedbush securities told Yahoo Finance Live.
â€œNot just in terms of getting into the S&P 500 and what it means from an institutional ownership and indexing,â€ said Ives. â€œItâ€™s really about profitability.â€
Tesla accounts for about 1.69% of the S&P 500 index. With a market capitalization of more than $640 billion as of Fridayâ€™s close, the electric vehicle maker is the largest issue ever put into the index. For every $11.11 dollars Tesla moves, the S&P 500 changes 1 point, according to S&P Dow Jones Indices.
Prior to the market open on Monday morning CEO Elon Musk tweeted:
Thanks to everyone who worked so hard to make Tesla successful. My heart goes out to you.
â€” Elon Musk (@elonmusk) December 21, 2020
The electric vehicle maker was added to the index after posting four consecutive quarters of profits.
â€œThat shot of credibility â€” I think it shows how far weâ€™ve come in the last few years especially in the EV market,â€ added Ives.
Year to date, the stock is up more than 700%. By comparison, the S&P 500 has gained more than 14% this year while the Nasdaq is up more than 40% year-to-date.
In August, Tesla announced a 5-for-1 stock adjusted split. It also took advantage of its all-time highs to sell stock twice about 3 months apart.
â€œIn those euphoric rides theyâ€™ve been able to monetize that, in terms of putting that in the treasure chest,â€ said Ives.
Ives had a base case price target of $560 on the stock, but a 12-18 month bull case price target of $1,000 â€” â€œIf they continue to execute on China.â€
â€œRight now itâ€™s an arms race in the EV market,â€™ said Ives. â€œI think weâ€™re going into a golden age for EV.â€
Ines covers the U.S. stock market. Follow her on Twitter atÂ @ines_ferre