The incredible run for America’s top electric car manufacturer, Tesla Motors (TSLA), seems to have hit the breaks following mixed third quarter results and a cautious outlook. The stock has long been flying high this year, surging over fourfold, though it has taken a bit of a pause lately (read: 5 Clean Energy ETFs Leading the Sector's Surge).
Tesla Earnings in Focus
Tesla missed on earnings but beat on revenues. The adjusted loss (including stock based compensation) per share came in at 4 cents versus the Zacks Consensus Estimate of break-even. Adjusted loss narrowed from the year-ago loss of $1.04.
Total revenue climbed 9% sequentially to $602.6 million and surpassed the Zacks Consensus Estimate of $553 million. Lower ZEV credit revenues were offset by increased vehicle deliveries and higher vehicle average selling prices. Gross margin (excluding ZEV credits) rose to 21% in Q3 from 14% in Q2.
The company delivered a record 5,500 Model S cars during the quarter and expects to deliver 6,000 cars in the fourth quarter. As such, TSLA raised its full-year forecast for total delivery to 21,500 from the previous expectation of 21,000.
For the fourth quarter, Tesla targets 25% gross margin. Additionally, earnings per share are expected to remain unchanged from the third quarter.
Disappointing results and a fall in ZEV credit revenue compelled investors to lock in some gains, leading to a sell-off. Tesla shares tumbled more than 12% in after-hour trading on Tuesday (read: 4 Sector ETFs to Watch in Q4).
Tesla currently has a Zacks Rank #3 (Hold) for the short term, suggesting that the bullish trend might come to a standstill for the time being and investors could book profits at the current level.
ETFs to Watch
A couple of ETFs having heavy exposure to this auto company were enjoying huge gains when Tesla share price rallied.
Tesla has been one of the hottest stocks of 2013 and a favorite pick among growth investors, surging nearly 422% in the year-to-date time frame. With TSLA’s third quarter disappointment and the large drop in its after-market share prices, this positive trend is less likely to continue.
Below, we have highlighted two ETFs that have a large allocation to TSLA and will likely be in focus in the coming days. Investors should closely monitor the movement in these funds and could catch the opportunity from any surge in the TSLA price, or avoid them if TSLA looks to drag ETFs down to close the year (read: all the Alternative Energy ETFs here):
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN)
This fund tracks the Nasdaq Clean Edge Green Energy Index and managed assets worth $83.3 million. It charges 60 bps in fees per year while volume is light suggesting a wide bid/ask spread.
In total, the product holds 43 securities in its basket. Tesla Motors occupies the fifth position in the fund with 6.95% of assets. Technology firms dominate this ETF, accounting for over one-third of the assets while oil & gas, and industrials round off to the next two spots from an industry look.
QCLN is up over 87% in the year-to-date time frame and has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with a ‘High’ risk outlook (read: Can the Clean Energy ETF Bull Run Continue?).
Market Vectors Global Alternative Energy ETF (GEX)
This ETF tracks the Ardour Global Index, focusing on companies that are primarily engaged in the business of alternative energy. The fund holds about 31 stocks in its basket with AUM of $95 million while charging 62 bps in fees per year. Average daily volume is also paltry for this fund.
Here, TSLA is the top firm with a 11.24% allocation. From a sector perspective, industrials take the largest share with 43.7%, closely followed by information technology (26.5%) and utilities (13.6%). In terms of country exposure, the fund is skewed toward the U.S. with 52% share while Ireland, Denmark, China, Italy and many others receive minor allocations.
The ETF gained nearly 67% year-to-date.
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