It's Official: Like It or Not, Millions Will Own Tesla Stock Soon - Motley Fool | Canada News Media
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It's Official: Like It or Not, Millions Will Own Tesla Stock Soon – Motley Fool

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A lot of people have strong feelings about electric vehicle pioneer Tesla (NASDAQ:TSLA), both as a company and as an investment. The Elon Musk-led company has generated plenty of controversy over its history, but its skyrocketing share price has left its automaker peers in the dust.

The stock’s amazing run has delivered 550% returns in just the past year, and over 9,500% gains in Tesla’s roughly 10 years as a publicly traded company. That has resulted in a share price that many investors think is far too high to pay.

Yet even if you believe that Tesla isn’t a buy right now, you might still end up acquiring some of its stock soon. That’s because the company that manages one of the most-followed stock indexes in the world just decided to add Tesla to it.

Image source: Tesla.

Tesla is joining the S&P 500

S&P Dow Jones Indices is the entity behind the S&P 500 Index (SNPINDEX:^GSPC). The popular benchmark contains roughly 500 of the largest and most influential U.S. companies, but its membership is not static. S&P Dow Jones often adds new components and removes old ones to reflect changing factors like market capitalization, takeover activity, and other corporate events.

For a long time, Tesla wasn’t eligible to be in the S&P 500 despite its large market cap. Many of the formal requirements for inclusion, such as a minimum share price and adequate share float, weren’t a problem for the electric automaker. The requirement that it took the longest for Tesla to meet was that it had to be profitable for four consecutive quarters and over a 12-month period.

Yet even when that happened earlier in 2020, S&P Dow Jones didn’t immediately pull the trigger. Some pundits cited issues with the quality of Tesla’s profits, boosted as they are by regulatory credits. Others pointed to the complexity of adding a company to the S&P 500 that was already as large as Tesla was.

S&P Dow Jones ended the speculation on Monday when it said it would add Tesla to the S&P 500 effective Dec. 21.

A couple of unusual things about Tesla’s addition to the S&P 500

However, the announcement wasn’t typical in a couple of respects. First, S&P Dow Jones didn’t announce which company Tesla will replace. It’s putting that decision off until we’re closer to the late-December rebalance date.

Also, S&P Dow Jones reached out to the investment community for guidance on precisely how to add Tesla. Given the company’s size — its market cap is above $420 billion — this move has the potential to cause a massive disruption to index-related trading. The index manager suggested the possibility of adding Tesla incrementally, possibly incorporating two separate dates on which portions of the final allocation would get put in the S&P 500.

You would’ve been better off buying earlier

The irony here is that index-fund investors who scoffed at buying Tesla earlier in 2020 are going to end up paying much higher prices for the shares. At the beginning of the year, you could’ve bought Tesla shares at a split-adjusted price of less than $100. As recently as June, Tesla stock was trading under $200 per share. But on Monday, Tesla closed above $400 per share — and it jumped more than $50 per share on the S&P 500 news.

However, index funds have no choice. If they want to track the S&P 500, they will need to own Tesla shares — regardless of the premium they’ll be paying to acquire them.

It’s not the end of the world

This isn’t the first time investors have had to accept index-fund additions they didn’t like. It happened with Facebook (NASDAQ:FB), but in hindsight, index investors have to be pleased with the returns the social media giant has generated for their funds.

Moreover, even at Tesla’s massive current size, its impact on your S&P 500 index fund won’t be all that big. Tesla will likely end up with a weighting of slightly over 1% in most of those funds. That will make it the biggest new addition ever — but it still doesn’t amount to a huge exposure to the automaker’s stock.

Tesla will continue to generate controversy, and it’s highly possible that the S&P addition will be the next event that triggers a massive feeding frenzy for the electric vehicle pioneer’s shares. In the end, though, what will matter is whether Tesla can convert on its amazing potential and expand into a business that justifies its industry-leading valuation.

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Telus prioritizing ‘most important customers,’ avoiding ‘unprofitable’ offers: CFO

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Telus Corp. says it is avoiding offering “unprofitable” discounts as fierce competition in the Canadian telecommunications sector shows no sign of slowing down.

The company said Friday it had fewer net new customers during its third quarter compared with the same time last year, as it copes with increasingly “aggressive marketing and promotional pricing” that is prompting more customers to switch providers.

Telus said it added 347,000 net new customers, down around 14.5 per cent compared with last year. The figure includes 130,000 mobile phone subscribers and 34,000 internet customers, down 30,000 and 3,000, respectively, year-over-year.

The company reported its mobile phone churn rate — a metric measuring subscribers who cancelled their services — was 1.09 per cent in the third quarter, up from 1.03 per cent in the third quarter of 2023. That included a postpaid mobile phone churn rate of 0.90 per cent in its latest quarter.

Telus said its focus is on customer retention through its “industry-leading service and network quality, along with successful promotions and bundled offerings.”

“The customers we have are the most important customers we can get,” said chief financial officer Doug French in an interview.

“We’ve, again, just continued to focus on what matters most to our customers, from a product and customer service perspective, while not loading unprofitable customers.”

Meanwhile, Telus reported its net income attributable to common shares more than doubled during its third quarter.

The telecommunications company said it earned $280 million, up 105.9 per cent from the same three-month period in 2023. Earnings per diluted share for the quarter ended Sept. 30 was 19 cents compared with nine cents a year earlier.

It reported adjusted net income was $413 million, up 10.7 per cent year-over-year from $373 million in the same quarter last year. Operating revenue and other income for the quarter was $5.1 billion, up 1.8 per cent from the previous year.

Mobile phone average revenue per user was $58.85 in the third quarter, a decrease of $2.09 or 3.4 per cent from a year ago. Telus said the drop was attributable to customers signing up for base rate plans with lower prices, along with a decline in overage and roaming revenues.

It said customers are increasingly adopting unlimited data and Canada-U.S. plans which provide higher and more stable ARPU on a monthly basis.

“In a tough operating environment and relative to peers, we view Q3 results that were in line to slightly better than forecast as the best of the bunch,” said RBC analyst Drew McReynolds in a note.

Scotiabank analyst Maher Yaghi added that “the telecom industry in Canada remains very challenging for all players, however, Telus has been able to face these pressures” and still deliver growth.

The Big 3 telecom providers — which also include Rogers Communications Inc. and BCE Inc. — have frequently stressed that the market has grown more competitive in recent years, especially after the closing of Quebecor Inc.’s purchase of Freedom Mobile in April 2023.

Hailed as a fourth national carrier, Quebecor has invested in enhancements to Freedom’s network while offering more affordable plans as part of a set of commitments it was mandated by Ottawa to agree to.

The cost of telephone services in September was down eight per cent compared with a year earlier, according to Statistics Canada’s most recent inflation report last month.

“I think competition has been and continues to be, I’d say, quite intense in Canada, and we’ve obviously had to just manage our business the way we see fit,” said French.

Asked how long that environment could last, he said that’s out of Telus’ hands.

“What I can control, though, is how we go to market and how we lead with our products,” he said.

“I think the conditions within the market will have to adjust accordingly over time. We’ve continued to focus on digitization, continued to bring our cost structure down to compete, irrespective of the price and the current market conditions.”

Still, Canada’s telecom regulator continues to warn providers about customers facing more charges on their cellphone and internet bills.

On Tuesday, CRTC vice-president of consumer, analytics and strategy Scott Hutton called on providers to ensure they clearly inform their customers of charges such as early cancellation fees.

That followed statements from the regulator in recent weeks cautioning against rising international roaming fees and “surprise” price increases being found on their bills.

Hutton said the CRTC plans to launch public consultations in the coming weeks that will focus “on ensuring that information is clear and consistent, making it easier to compare offers and switch services or providers.”

“The CRTC is concerned with recent trends, which suggest that Canadians may not be benefiting from the full protections of our codes,” he said.

“We will continue to monitor developments and will take further action if our codes are not being followed.”

French said any initiative to boost transparency is a step in the right direction.

“I can’t say we are perfect across the board, but what I can say is we are absolutely taking it under consideration and trying to be the best at communicating with our customers,” he said.

“I think everyone looking in the mirror would say there’s room for improvement.”

This report by The Canadian Press was first published Nov. 8, 2024.

Companies in this story: (TSX:T)

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TC Energy cuts cost estimate for Southeast Gateway pipeline project in Mexico

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CALGARY – TC Energy Corp. has lowered the estimated cost of its Southeast Gateway pipeline project in Mexico.

It says it now expects the project to cost between US$3.9 billion and US$4.1 billion compared with its original estimate of US$4.5 billion.

The change came as the company reported a third-quarter profit attributable to common shareholders of C$1.46 billion or $1.40 per share compared with a loss of C$197 million or 19 cents per share in the same quarter last year.

Revenue for the quarter ended Sept. 30 totalled C$4.08 billion, up from C$3.94 billion in the third quarter of 2023.

TC Energy says its comparable earnings for its latest quarter amounted to C$1.03 per share compared with C$1.00 per share a year earlier.

The average analyst estimate had been for a profit of 95 cents per share, according to LSEG Data & Analytics.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:TRP)

The Canadian Press. All rights reserved.

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BCE reports Q3 loss on asset impairment charge, cuts revenue guidance

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BCE Inc. reported a loss in its latest quarter as it recorded $2.11 billion in asset impairment charges, mainly related to Bell Media’s TV and radio properties.

The company says its net loss attributable to common shareholders amounted to $1.24 billion or $1.36 per share for the quarter ended Sept. 30 compared with a profit of $640 million or 70 cents per share a year earlier.

On an adjusted basis, BCE says it earned 75 cents per share in its latest quarter compared with an adjusted profit of 81 cents per share in the same quarter last year.

“Bell’s results for the third quarter demonstrate that we are disciplined in our pursuit of profitable growth in an intensely competitive environment,” BCE chief executive Mirko Bibic said in a statement.

“Our focus this quarter, and throughout 2024, has been to attract higher-margin subscribers and reduce costs to help offset short-term revenue impacts from sustained competitive pricing pressures, slow economic growth and a media advertising market that is in transition.”

Operating revenue for the quarter totalled $5.97 billion, down from $6.08 billion in its third quarter of 2023.

BCE also said it now expects its revenue for 2024 to fall about 1.5 per cent compared with earlier guidance for an increase of zero to four per cent.

The company says the change comes as it faces lower-than-anticipated wireless product revenue and sustained pressure on wireless prices.

BCE added 33,111 net postpaid mobile phone subscribers, down 76.8 per cent from the same period last year, which was the company’s second-best performance on the metric since 2010.

It says the drop was driven by higher customer churn — a measure of subscribers who cancelled their service — amid greater competitive activity and promotional offer intensity. BCE’s monthly churn rate for the category was 1.28 per cent, up from 1.1 per cent during its previous third quarter.

The company also saw 11.6 per cent fewer gross subscriber activations “due to more targeted promotional offers and mobile device discounting compared to last year.”

Bell’s wireless mobile phone average revenue per user was $58.26, down 3.4 per cent from $60.28 in the third quarter of the prior year.

This report by The Canadian Press was first published Nov. 7, 2024.

Companies in this story: (TSX:BCE)

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