High-flying Tesla joins S&P 500; skeptics say buyer beware

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Tesla's shares have skyrocketed, rising about 700% this year alone. Monday morning it joined the prestigious S&P 500 index with a market value of over $600 billion. It's the largest addition in the history of the index.

In this Nov. 8, 2020, file photo, an unsold 2021 S70 sedan sits at a Tesla dealership in Littleton, Colo. DETROIT -- In the middle of last year, Tesla's losses were piling up, sales weren't enough to cover expenses and big debt payments loomed. The situation was so bad that one influential Wall Street analyst raised the possibility that Tesla wouldn't be able to pay its bills and would have to be restructured financially.

Tesla and Musk have for years engendered strong divisions on Wall Street, and the rise from near-collapse to an astronomical valuation is no exception. Tesla's lowest-priced vehicle, the Model 3, is pulling buyers from mainstream brands with a base price of $37,990, Keeney said. That can quickly rise above $40,000 or even $50,000 with options. Tesla's upcoming angular Cybertruck pickup, starting at $39,900, will hit a mass market price comparable to other pickups, Keeney said. And Musk has promised battery breakthroughs that will bring a more affordable $25,000 vehicle, she said.

Demand for Tesla shares is expected to be strong on Monday as institutional investors buy to make their portfolios mirror the S&P 500. But Brinkman recommends against that.

 

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