Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Why Tesla Stock Jumped on Thursday

By Daniel Sparks - Dec 17, 2020 at 8:39PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The electric-car maker's improving financials are winning the approval of this key credit rating agency.

What happened

Shares of electric-car maker Tesla ( TSLA -6.42% ) rose sharply on Thursday. The stock ended the trading day up 5.3%, trading at nearly $656.

The growth stock's gain was likely caused by a combination of an overall bullish day in the stock market and S&P Global's ( SPGI -1.12% ) move to increase its credit rating on the automaker's debt.

Three vehicles outside of Tesla's factory.

Image source: The Motley Fool.

So what

Ahead of S&P Global's move next week to include Tesla stock in the S&P 500 for the first time, S&P Global changed its rating of Tesla's debt to BB, up from BB-. S&P Global noted that the company's "mounting liquidity has substantially reduced its financial risk." 

This news follows Tesla's recent capital raise. Earlier this month, Tesla entered into an agreement to issue up to $5 billion worth of common stock. This would bolster Tesla's cash position by an impressive 34%.

Also likely helping the stock on Thursday was the market's big move higher. Highlighting optimism in the market, the S&P 500 rose 0.6% to a record high.

Now what

Tesla is set to be added to the S&P 500 before market open. While it's possible that this could provide a near-term boost to the stock, investors shouldn't count on it.

What's more important is that Tesla meets its full-year guidance for 500,000 deliveries and that it continues to provide evidence that this is just the tip of the iceberg for its long-term growth story.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$1,014.97 (-6.42%) $-69.63
S&P Global Inc. Stock Quote
S&P Global Inc.
SPGI
$455.82 (-1.12%) $-5.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.