Extra upside potential after Tesla’s S&P 500 welcome
The pandemic took a back seat to Tesla on Friday as traders swapped stocks ahead of their upcoming debut in the market benchmark, CNBC’s Jim Cramer said Friday.
Trading Tesla, the flagship of soaring tech stocks in 2020, put pressure on the rest of the market as the electric vehicle maker could join the S&P 500 before it opens on Monday.
“Today’s action … had nothing to do with Covid and everything to do with Tesla’s admission to the S&P 500. That means the entire index has to be rebalanced to make room for a stock that just won’t quit, either not today “said the Mad Money host.
“Typically, newcomers to the S&P are much smaller than this one. Tesla is one of the top 10 largest companies in America by market capitalization, so the impact is being felt across the market,” he added.
S&P Dow Jones Indices, which determines the 500 components of the S&P 500, announced a little over a month ago that Tesla would be included in the stock index on December 21st. Tesla shares are up 61% since the day it was announced. Billions of shares in other companies were sold at Friday’s session to make room for inclusion, said Cramer, who was optimistic about the company.
The S&P 500 fell 0.35% on the day of trading to close at 3,709.41. The 30-stock Dow Jones index fell 0.41%, or 124 points, to 30,179.05. The Nasdaq Composite fell 0.07% to 12,755.64. All three averages pulled back from their highs.
However, Tesla rose 6% to a record close of $ 695. The company will replace Apartment Investment and Management Co in the index.
“I bet Tesla has more advantages than [CEO Elon] Musk consistently meets and exceeds his goals, “said Cramer.” I’m thrilled that the stock made so much money, and I’m thrilled that it has helped a whole new generation fall in love with stock picking. “
Despite Friday’s negative trading day, major averages ended the week in gains, including a 3% gain in the Nasdaq Composite over the last five sessions.
“As soon as the index funds sell everything else to make room for this $ 650 billion behemoth, I’ll bet the Santa Claus rally will resume,” he said.
Cramer announced his schedule for the coming week, which will be shortened when the markets close at 1:00 p.m. ET on Thursday to mark the Christmas holidays. All profit forecasts are based on FactSet estimates:
Tuesday: Carmax and Cinta’s earnings
- Earnings release for the third quarter of the financial year 2021: before the market; Conference call: 9 a.m.
- Projected earnings per share: $ 1.13
- Estimated Revenue: $ 5.03 billion
“CarMax’s inventory is tied to range since we received all positive vaccine data,” said Cramer. “Maybe when we see the results and people realize that demand is off the charts, it might break out.”
- Earnings release for the second quarter of the financial year 2021: before the market; Conference call: Tuesday, 10 a.m.
- Projected earnings per share: $ 2.18
- Estimated Revenue: $ 1.75 billion
“If Cintas is doing well, it means that small and medium-sized businesses are doing better than we think,” he said. “If they’re bad, that’s another story.”
Wednesday: Paychex earnings
- Earnings release for the second quarter of the financial year 2021: before the market; Conference call: Tuesday, 9:30 a.m.
- Projected EPS: 66 cents
- Estimated Revenue: $ 954 million
“Paychex has a tremendous number of small and medium-sized customers that they use to automate their payroll,” said Cramer. “In the long term, the share has performed excellently, but in the short term it tends to act as a proxy for its customers.”