07.09.13 7:19 PM ET
Tesla Stock Added to NASDAQ 100 Index
The milestones keep coming for Tesla Motors, the start-up electric car manufacturer many people love to hate.
It repaid the large loan it took from the government nine years early, posted its first profit since inception, and has seen its market capitalization soar above $14 billion. Tuesday morning, Tesla received another stamp of approval. Nasdaq announced it would add Tesla to the Nasdaq 100 index, which is composed of many of the largest non-financial companies traded on the exchange. The move will take place on July 15 as software giant Oracle leaves for the New York Stock Exchange.
Making it to the Nasdaq 100 is seen by many as a rite of passage from fledgling startup to serious player. Sandy Mehta, chief executive officer of Value Investment Principals told Bloomberg that for Tesla the move is “a coming of age, recognition that a company has market cap and liquidity.” Since the announcement Tesla’s stock has risen as much as 2 percent to reach $125 a share. The stock has already risen by 268 percent this year and some believe Nasdaq’s move will push it even higher. After all, investment products that track the NASDAQ 100 will now have to add Tesla to their holdings.
Of course, Tesla still has many naysayers, including some large institutions. Bank of America Merrill Lynch investment analysts have scoffed at the $120 price target held by others and maintain a $39 target for the company. As reported by CNBC analyst Stephen Weiss points to some of the fundamentals as a reason to be skeptical, “Do you know what the operating margins are, after tax credits? Two percent, they barely make money.”
Despite the criticism, Tesla has continued its meteoric rise. Enthusiasts compare the stock price’s rapid growth to that of Amazon, another company that sported low-margins in its early years but has matured into a dominant company. Tesla founder Elon Musk doesn’t seem as concerned with being the next big company as being the next big industry. In his own words, he “likes to be involved in things that change the world.” The jury is out on whether Tesla will change the world. But it is growing from a start-up into a major industrial company in front of our eyes.