Tesla was the biggest drag on the S&P 500 Index in its first day of trading on the benchmark.
The electric-vehicle maker, which now represents 1.6% of the index and ended the day as its sixth heaviest-weighted stock, fell as much as 7% as it retraced gains from Dec. 18 when tens of millions of shares were purchased by index-fund managers. Tesla budged the S&P 500 Index by about 4.1 points of its total 14.49-point drop, according to data compiled by Bloomberg.
“Hedge funds will treat this as a negative catalyst for Tesla given buying pressure eases off very quickly,” Roth Capital Partners analyst Craig Irwin said in an interview.
A Reuters report saying Apple is moving forward with self-driving technology and aims produce a passenger vehicle by 2024 also weighed on Tesla shares late in the day, sending them to session lows. Tesla ended lower by 6.5%.
Institutional buying of Tesla surged Dec. 18 as index-tracking managers rushed to add the shares to their funds ahead of its index inclusion. Almost $60 billion worth of stock changed hands at $695 a share, most of it in one giant trade in the session’s waning seconds, and more than $150 billion worth of Tesla shares traded Dec. 18.
Other electric-vehicle companies, whose shares have gained significantly over the past month after Tesla’s S&P 500 inclusion was announced, were also weak Monday. Some of the biggest declines came from Nikola and Workhorse Group.
Tesla soared 731% this year through Dec. 18 in anticipation of the historic inclusion, making it the biggest company ever to be added to the benchmark. The electric-vehicle pioneer also joined the S&P 100, replacing oil and gas firm Occidental Petroleum Corp.
“There is strong precedence for positive returns for stocks prior to S&P 500 inclusion and post announcement, but very limited precedent for near term outperformance post inclusion,” Sanford C. Bernstein analyst Toni Sacconaghi wrote in a note this month.
Bullish analysts are expecting the rally to resume soon, although possibly at a slower pace.
JMP Securities analyst Joseph Osha on Monday raised his price target on Tesla to a Street-high of $788 from $516, saying the company’s market opportunity and its potential shipments should be larger than previously estimated. Osha raised his 2025 delivery estimate to 3.05 million units from 2.5 million. The company has said it expects to deliver about half a million cars this year.