[Overseas Stocks Spotlight] "Tesla, Sailing Through COVID, Could It Join the S&P 500?"

[Asia Economy Reporter Eunmo Koo] Tesla (Tesla·TSLA.US) maintained a profitable trend despite the negative business environment caused by the novel coronavirus (COVID-19). As it entered a full-scale quantitative growth phase, it confirmed a healthy cash flow to support necessary investments, and it is also evaluated to have met the conditions for inclusion in the Standard & Poor's (S&P) 500 index.

Tesla's revenue for the second quarter of this year was $6 billion, down 4.9% compared to the same period last year, and operating profit turned positive at $300 million. Total production volume was 82,272 units (Model S·X 6,326 units, Model 3·Y 75,946 units), down 5% from the same period last year, and deliveries reached 90,891 units, exceeding market expectations?which reflected concerns about production disruptions?by 22%. As of the end of the second quarter, cash and cash equivalents increased by $540 million from the previous quarter to $8.6 billion, maintaining stable cash flow.

The annual delivery guidance of 500,000 units was maintained. Since deliveries in the first half of this year were 180,000 units, 320,000 units need to be delivered to meet the guidance. Tesla also announced plans to increase the production capacity of the Fremont Model 3·Y factory from 400,000 units to 500,000 units to expand electric vehicle production capacity, and plans to build a new Gigafactory in Texas. Wonju Lee, a researcher at Kiwoom Securities, said, “Although the exact production capacity has not yet been disclosed, since Tesla’s Chief Financial Officer (CFO) mentioned in the conference call that it would be the ‘largest facility,’ it is likely that they are planning a facility with an annual capacity exceeding 500,000 units.”

The possibility of inclusion in the S&P 500 index is high, but the timing is difficult to predict. The decision to include a company in the S&P 500 index is made by the index committee of S&P Dow Jones Indices. The committee considers not only quantitative indicators such as four consecutive quarters of profitability, being a U.S.-headquartered company, and a market capitalization of over $8.2 billion, but also qualitative indicators such as industry representation and corporate sustainability to decide on inclusion.

Researcher Lee explained, “Tesla has met the four consecutive quarters of profitability criterion, and considering various factors, the possibility of inclusion in the S&P 500 is high, but due to the excessively large market capitalization, the timing is difficult to predict. It is possible that the decision could be made as early as the third Friday of September, when the regular meeting of the S&P Dow Jones Indices index committee is held.”

This content was produced with the assistance of AI translation services.