Goldman Sachs On Tesla’s S&P 500 Entry: “Could Spark $8 Billion Buying Spree”
Goldman Sachs, which has reportedly made $100 million off of Tesla trades this year, has pointed out that Tesla’s S&P 500 entry could “spark an $8 billion buying spree. Back in September, the International Financing Review (IFR) noted that Goldman Sachs made $100 million from its series of trades that involved Tesla. Goldman Sachs was able to capitalize on the steep rise of Tesla’s share price over the summer — one that IFR pointed out helped to fuel a broader surge in U.S. stock markets.
IFR also pointed out that Tesla has been one of the hottest stocks of the last six months and noted that the sizable revenues Goldman Sachs raked in show that its traders managed to profit a great deal. IRF also pointed to a Barclays analysis that suggested Tesla benefitted from the highest increase in options trading activity across the entire market. The options volumes on Tesla jumped to $1.45 trillion. (Full disclosure: I own a tiny share of Tesla [NASDAQ:TSLA]. Nothing in this article or published anywhere on CleanTechnica is investment advice, though.)
$8 Billion Buying Spree
Now that Tesla will be added to the S&P 500, the share price has lifted and is flirting around the $400-$500 range. Goldman Sachs believes that a “tidal wave” of mutual-fund cash will fuel another rally in December. Arjun Menon, Goldman’s vice president of U.S. equity strategy, noted that of the investment bank’s 189 large-cap funds tracked, only 157 with $500 billion assets under management did not hold Tesla stock at the beginning of the fourth quarter. He also estimated that if each of these funds without Tesla stock were to add a benchmark-weight position to the stock once it is listed on the S&P 500, flows into Tesla could total $8 billion which is around 2% of Tesla’s market cap.
Craig Erlam, a senior market analyst with OANDA penned in a note that Tesla’s being added to the S&P 500 will mean “a flood of cash pouring Tesla’s way as tracker funds pile in.” Erlam also added that this wasn’t a bad way to end the year. “Not a bad way to cap off 2020, a year in which the share price has risen more than 400% and there’s still plenty of time to go.”
Adam Jonas On What Tesla Really Is
The opinion Goldman Sachs is putting out now is that Tesla will spark a massive amount of buys once added into the index. This follows Adam Jonas emphasizing what many of us have been saying rather frequently, that Tesla’s not just a car company. In a research note to clients, Jonas admitted that Tesla wasn’t just a car company. “To only value Tesla on car sales alone ignores the multiple businesses embedded within the company,” he said, while upgrading their Tesla evaluation from equal-weight and raising his price target by 50% — from $360 to $540, which suggests an additional upside of 22% for the stock. Jonas also described Tesla’s other services as key reasons that it’s not just a carmaker. Those are:
- Auto
- Energy
- Insurance
- Mobility/Ridesharing
- Tesla Network Services
- Tesla as a 3rd party supplier.
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What If The Real Reason The S&P 500 Snubbed Tesla Back In September Was Fate?
Back in September, when everyone who supported Tesla was excited about Tesla’s 4th consecutive profitable quarter, many expected that the S&P 500 would add Tesla to its index then. Instead, Tesla was snubbed. Many of us who invest because we believe in Tesla felt a bit hurt, while critics were ecstatic.
As 2020 comes to an end, the realization that Tesla will be added to the index on December 21, 2020, wasn’t lost on me. Many who follow the stock closely know about the long war between Tesla supporters and Tesla short sellers. Elon Musk has even taunted them (within good reason) with short shorts. I remember days when some of them would tell me I was stupid for investing in Tesla. “Thank you for your money, dumbass,” they would say to me. I’ve weathered many insults from them and my reply was often, “Winter is coming.” Little did I know that something Elon always says would ring true for me in this regard.
Fate 🖤 Irony
— Elon Musk (@elonmusk) November 17, 2020
Perhaps Tesla being added on the shortest day of the year — the Winter Solstice — is a lovely twist of fate. Winter is indeed coming for those who short Tesla. Perhaps those who spend their time trolling, sending death threats, stalking, and wasting their life on trying to bring others down will feel the brunt of this winter storm that’s about to take place for them. Or maybe some of them will wisen up, realize what horrible people they’ve been, and start to understand that money is not the motivator here — yes, it’s a major factor, but for Elon Musk and for Tesla, there’s an even larger picture and goal.
Elon is right, though, fate does indeed love irony.
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