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How did TESLA get into the S&P 500?
Let’s break it down in terms to know
Tesla’s market cap (capitalization) recently rose above $500 billion, as calculated by multiplying the total shares of stock by the stock price.
Their price-to-earnings ratio (known as P/E ratio) is 1150, which means that the stock price dramatically outweighs their current earnings. Compare this to General Motor’s P/E ratio of ~15. So why is Tesla’s stock so overvalued? Not surprisingly, investors are expecting high growth rates in the future.
Tesla has also achieved 4 consecutive quarters of profit, which is one of the requirements to be included in the S&P 500.
Read more about Tesla joining the S&P 500 in December here.