- It's been one year since Tesla was added to the S&P 500 benchmark, and investors are happy.
- Tesla stock has returned 29% since its benchmark inclusion, outperforming the S&P 500.
- The return has been mostly driven by consistently strong earnings reports and bullish projections from Wall Street.
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On December 20, 2020, Tesla stock was added to the popular S&P 500 benchmark for the first time ever.
It was an unprecedented move for the index given how big Tesla already was, sporting a market capitalization of about $650 billion on December 18, 2020.
It took Tesla longer than usual to be added to the index because despite its sky-high valuation, it hadn't generated profits for four quarters in a row until earlier that year, which is a criteria to be added to the index.
Many market participants viewed Tesla's inclusion as a likely top in the stock, as it's not uncommon for a stock that is added to an index to go on to underperform the stock that it replaced.
But Tesla has once again defied the skeptics and pleased its investors, albeit with steep ups and downs along the way. Since being added to the S&P 500 last year, the electric vehicle maker's stock surged 29%, outperforming the index by six percentage points.
Driving those returns were consistently strong earnings reports and production, with Tesla on track to deliver nearly one million vehicles this year. That's a double from 2020, when Tesla delivered just under 500,000 vehicles.
Tesla's stock outperformance has also been driven by bullish projections from Wall Street, and Elon Musk. Ark Invest's Cathie Wood believes the stock can more than triple to $3,000, and Musk has forecasted continued annual growth of about 50% over the next five years.
Tesla was added to the S&P 500 with a starting weight of 1.69%. Since then, the stock soared to a more than $1 trillion company, pushing its weight in the index to more than 2%. On Tuesday, Tesla is worth $909 billion and has a weight of about 1.89% in the index.
