Tesla Shares Continue To Surge Amid Speculation Stock Will Soon Join S&P 500 Index

Shares of electric carmaker Tesla (TSLA) surged almost 10% to an all-time new high as of 1:30 p.m. Monday as speculation intensified the company will soon join the prestigious S&P 500 index.

Tesla shares have quadrupled in value year-to-date as the company has become the world’s most valuable automaker – overtaking Toyota (TM) -- and is also now one of the ten largest public companies in the U.S., surpassing Procter & Gamble (PG).

Tesla currently has a market cap of almost $309 billion – which makes it larger than at least 95% of the stocks currently on the S&P 500 index.

Tesla has been in the NASDAQ-100 stock index since 2013.

On Friday, the carmaker said that it will hold its much anticipated “Battery Day" on Sept. 22 during its annual shareholder meeting, in Fremont, Calif.

On that day company CEO Elon Musk is expected to unveil new potential "game changing" battery developments, said Wedbush analyst Daniel Ives.

That event will likely serve as "a major positive catalyst for the stock," Ives added.

"The technology innovations around Giga/Fremont remain the key ingredients in Tesla's success on the battery front and we believe the company is getting closer to announcing the million-mile battery," said Ives.

Of more urgency, Tesla will report its second quarter earnings on July 22 in the wake of better-than-expected quarterly vehicle delivery numbers released earlier in the month.

If – as expected – Tesla posts positive earnings for the fourth consecutive quarter, it will mark an important milestone in order to qualify for inclusion in the S&P 500 index.

“Entry into the S&P 500, analyst upgrades, geographic expansion and increasing bullishness about the future of electric vehicles are all contributing to [Tesla’s stock price] rise,” wrote Al Root of Barron’s.

Howard Silverblatt, a senior analyst at S&P Dow Jones, told Reuters that the only similar precedent was when search engine giant Yahoo (YHOO) joined the index in 1999. At that time, when the announcement was made that Yahoo would be included in the index, shares soared 64% in only five trading days prior to entry.

"The lesson learned from Yahoo was that when you have an up-and-coming issue that may possibly go into the index, you should already own a little of it," said Silverblatt. "If you had to get into that stock, you were paying a heck of a premium compared to owning it a week earlier."

Tesla may now also be seeking to enter one of the world’s largest consumer markets, India, a land of 1.3 billion people.

“Musk is well down the path of preparing to enter the Indian market, where we see China-like potential,” wrote Craig Irwin, managing director at Roth Capital.

JMP Securities’ senior energy technology analyst, Joe Osha said in a recent note that he thinks Tesla will record $100 billion in annual revenues by 2025 (Tesla generated $24.6 billion in revenue in its latest fiscal year).

But not everyone is sold on Tesla.

Larry McDonald, editor of The Bear Traps Report, cautioned that he thinks Tesla’s share price has run up recently not due to fundamentals but rather by investors bidding up shares on anticipation of the stock’s inclusion in the S&P 500.

“By buying up Tesla now, front-runners are forcing the S&P Indexes to give the stock a higher and higher weighting,” McDonald wrote. “Thus [exchanges traded funds and stock] indexes will be forced to pay up, buying even more shares. Then the hot money exits, leaving indexes holding the bag.”

Similarly, Adam Jonas, auto company analyst at Morgan Stanley, warned on Friday that “the days of Tesla’s virtually unchallenged dominance may be numbered.”

Jonas has a $740 price target on Tesla shares, less than half of what the stock currently trades at.