Tesla shares build on rally despite of doubts ahead of S&P 500 debut

Tesla shares rose 6 percent on Monday, approaching a $500 billion market value and extending gains to 27 percent since news a week ago that the electric car maker will debut in the S&P 500 in December, forcing index funds to buy billions of dollars of its stock. 

Up about 500 percent in 2020, Tesla has become by far the world's most valuable automaker, despite a production output just a fraction of Toyota, Volkswagen or General Motors.

Tesla is now five times more valuable than GM and Ford combined and the latest rise in the Silicon Valley automaker's shares came after Wedbush analyst Daniel Ives bumped his price target to $560 from $500.

While he maintained his neutral rating, Ives also said the stock could hit $1,000 in a "bull case", reflecting steeper demand for electric vehicles in coming years.

However, the median price target of analysts covering the stock is $385, about 26 percent below the $519 it hit on Monday, reflecting a belief among many on Wall Street that Tesla's shares have become overvalued.

Index funds trying to match the S&P 500's performance will have to buy more than $50 billion of Tesla's stock ahead of its inclusion on December 21, and Goldman Sachs estimated last week that actively managed mutual funds could buy another $8 billion.

Now worth $491 billion, Tesla is Wall Street's seventh most valuable company, just behind Berkshire Hathaway and just ahead of Visa, Refinitiv data shows.

(Cover: SpaceX owner and Tesla CEO Elon Musk arrives on the red carpet for the automobile awards "Das Goldene Lenkrad" given by a German newspaper in Berlin, Germany, November 12, 2019.)

Source(s): Reuters