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Tesla defies doubters as builds on rally ahead of S&P 500 debut

Tesla defies doubters as builds on rally ahead of S&P 500 debut

The Tesla logo is seen at the entrance to Tesla Motors' showroom in Manhattan's Meatpacking District in New York City, on Dec 14, 2017. (Photo: REUTERS/Brendan McDermid)

NEW YORK: Tesla shares rose 6 per cent on Monday (Nov 23), approaching a US$500 billion market value and extending gains to 27 per cent 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 per cent in 2020, Tesla has become by far the world's most valuable automaker, despite production that is 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 US$560 from US$500.

While he maintained his neutral rating, Ives also said the stock could hit US$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 US$385, about 26 per cent below the US$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 US$50 billion of Tesla's stock ahead of its inclusion on Dec 21, and Goldman Sachs estimated last week that actively managed mutual funds could buy another US$8 billion.

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

Source: Reuters

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