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ETFs in Focus on Tesla Q4 Earnings Beat, Model 3 Target

Sweta Killa
Three factors that could make these value ETFs winners in the second quarter.

After the closing bell on Wednesday, Tesla Motors TSLA reported better-than-expected results for the fourth quarter of 2017. The electric carmaker outpaced the earnings estimate and is on track to meet its Model 3 production target.

Tesla Q4 in Focus

Adjusted loss per share came in at $3.04, narrower than the Zacks Consensus Estimate of a loss of $3.19 but wider than the year-ago loss of 69 cents per share. Revenues climbed 44% to $2.288 billion and fell shy of the Zacks Consensus Estimate of $3.299 billion.

Tesla delivered 29,967 vehicles (28,425 Model S and Model X combined, and 1,542 Model 3) during Q4, up 30% from the year-ago quarter. The Model 3 production was far below analysts’ expectation of 4,100 vehicles hurt by battery issues. The automaker expects to produce 2,500 Model 3 cars per week by the end of the first quarter and accelerate it to 5,000 a week by the end of the second quarter. Additionally, it targets 100,000 Model S and Model X deliveries for this year (read: Auto Sales Hit the Brakes in 2017: ETFs & Stocks in Focus).

Tesla further reiterated its goal to produce 1 million vehicles annually by 2020 and plans to make capital investments related to the upcoming Model Y SUV toward the end of this year.

The results pushed Tesla shares higher as much as 2% in aftermarket hours on elevated volume. Tesla currently has a Zacks Rank #3 (Hold) and a VGM Style Score of F.

ETFs to Watch

The smooth trend is expected to continue in the ETF world for funds having substantial allocation to this luxury carmaker. Below we highlight five ETFs that could be great plays for investors to tap Tesla in the coming days (see: all the Alternative Energy ETFs here).

VanEck Vectors Global Alternative Energy ETF GEX

This ETF tracks the Ardour Global Index Extra Liquid, focusing on global companies that are primarily engaged in the business of alternative energy. The fund holds about 31 stocks in its basket with AUM of $86 million, while charges 62 bps in fees per year. Average daily volume is paltry at about 5,000 shares. Tesla occupies the third position in the basket with 9.6.2% allocation. In terms of country exposure, the fund is skewed toward the United States with 56.5% share, while Denmark and China round off the top three spots.

ARK Industrial Innovation ETF ARKQ

This is an actively managed ETF seeking long-term capital appreciation by investing in companies that benefit from the development of new products or services, technological improvement and advancements in scientific research related to robotics, energy storage, innovative materials, alternative energy sources, infrastructure development, space exploration, autonomous vehicles and 3D printing. This approach results in a basket of 48 stocks, with TSLA occupying the top spot holding 9.8%. The product has accumulated $139.7 million in its asset base and charges 75 bps in fees per year. It sees a lower volume of about 44,000 shares a day (read: 7 Top Active ETFs of 2017).

First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN

This fund tracks the Nasdaq Clean Edge Green Energy Index and manages assets worth $92.6 million. It charges 60 bps in fees per year while trades in a light volume of around 30,000 shares per day. In total, the product holds 36 U.S. securities with Tesla Motors taking the second spot, holding 9.1%. Semiconductors dominate this ETF, accounting for 27.8% of the assets while renewable energy equipment, electrical components & equipment, and alternative electricity round off the next three spots with a double-digit allocation each.

ARK Innovation ETF ARKK

Like ARKQ, this is also an actively managed fund and follows the same strategy but provides exposure to genomic companies, industrial innovation companies or Web x.0 companies. In total, the fund holds 56 securities in its basket, with Tesla occupying the top position, holding 6% share. The product has accumulated $522.9 million in its asset base and trades in a good volume of about 231,000 shares. Expense ratio comes in at 0.75% (read: S&P 500 Tops 2,700: ETFs & Stocks Outperforming to Start 2018).

Global X Lithium & Battery Tech ETF LIT

The product provides global exposure to a broad range of firms engaged in lithium mining, refining, and battery production by tracking the Solactive Global Lithium Index. Holding 36 securities in its basket, Tesla takes the eight spot with 5% share. American firms dominate the portfolio with 43% of assets while South Korea, Australia and Japan have a double-digit allocation each. From a sector look, the ETF is heavy on materials with 61% share, closely followed by consumer discretionary (15%), industrials (14%) and technology (11%). The fund has amassed $1 billion in AUM and trades in solid volume of nearly 751,000 shares per day. Expense ratio comes in at 0.76%.

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