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Shares of the Palo Alto, Calif.-based electric-vehicle maker fell 6.3% in early trading after ending at a record high of $695 on Friday.
The Elon Musk-led company, which has a $659 billion market capitalization, carries an S&P 500 weighting of 1.69% and is the index’s fifth-largest member. An $11.11 move in Tesla shares will move the S&P 500 1 point.
Tesla’s addition to S&P 500 comes after the company in October posted a fifth-consecutive quarterly profit.
Inclusion in the index is “clear validation of the company’s profitability trajectory looking ahead,” wrote Wedbush Securities analyst Dan Ives, who raised his price target to $715 per share from $550. He says shares could reach $1,000 apiece in a bull-case scenario.
Tesla shares soared 70% through Friday, adding $272 billion in market capitalization, since S&P Dow Jones Indices announced on Nov. 16 that the company would be added to the benchmark index. For comparison, Toyota Motor Corp., the world’s second-largest automaker by market capitalization, was valued at $210 billion.
Tesla shares were up 731% this year compared to the S&P 500’s 15% gain.