Tesla Motors Inc (TSLA) After Joining NASDAQ-100?

Tesla stockBlomst / Pixabay

Tesla Motors Inc (NASDAQ:TSLA) shares gained even more on Monday evening when an announcement was made from NASDAQ OMX Global Indexes that the stock will replace Oracle in NASDAQ 100 Index (INDEXNASDAQ:NDX).

Tesla Motors Inc (TSLA) After Joining NASDAQ-100?

Tesla Motors Inc (NASDAQ:TSLA) shares will be admitted in the NASDAQ-100 and the NASDAQ-100 Equal Weight Index (INDEXNASDAQ:NDXE) on July 15 after which the stock will be entitled to be included in ETFs like PowerShares QQQ (QQQ) and the First Trust NASDAQ-100 Equal Weighted Index Fund.

Analysts have different views

Analysts are not united over the valuation of Tesla Motors Inc (NASDAQ:TSLA), and according to some the stock is overvalued. However, some of the experts feel that the automaker is setting up a new example and creating a new era in the auto industry. In mid June, the short interest on the stock increased around 32 percent even though the stock increased three times in the past 90 days.

There is no consensus among the investors on the decision of moving the stock to the NASDAQ 100. Some believe that trading has been interfered to meet the parameters of the index.

Inclusion of Tesla won’t have much impact

The result of moving a stock in NASDAQ 100 and QQQ can be analyzed by looking at the impact when 10 other stocks were added or removed from the index in December, says a report from Benzinga by Todd Shriber.

The following 10 stocks became members of the NASDAQ-100 on December 24, 2012: Analog Devices (ADI), Catamaran (CTRX), Discovery Communications (DISCA), Equinix (EQIX), Liberty Global (LBTYA), Liberty Media (LMCA), Regeneron Pharmaceuticals (REGN), SBA Communications (SBAC), Verisk Analytics (VRSK) and Western Digital (WDC).

Among the 10 stocks, Regeneron performed worst with a gain of 0.6 percent. Western Digital was the top performer with 14.3 percent.

All ten stocks gained after being included in the index. Taking into consideration the current market cap of $14.1 billion, if Tesla Motors Inc (NASDAQ:TSLA) was already in QQQ today, then it would not have had a great effect on the ETF than Analog devices, which has a weight of 0.41 percent in the ETF, according to PowerShares data.

Therefore, it can be said that stock valuation will not be affected by the addition of shares into the index, and neither will the sale of cars see any impact.

Bull’s have their own theory

Bullish traders want Tesla Motors Inc (NASDAQ:TSLA) to be removed from the index because Netflix, which was removed last year in December from NASDAQ 100, doubled in the first quarter. The stock has again been added to the index. The other stock that was removed together with Netflix, Inc. (NASDAQ:NFLX) was Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR). However, this stock has not been added back and has risen 67 percent this fiscal.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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