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ETFs to Watch Post Tesla Q4 Earnings Miss

Sweta Killa

After the closing bell on Wednesday, Tesla Motors TSLA reported mixed results for the fourth quarter of 2018. Though the electric carmaker missed earnings estimate, it posted back-to-back quarterly profit for the first time in its history and outpaced estimates on revenues.

Adjusted earnings per share came in at 78 cents, much lower than the Zacks Consensus Estimate of $1.00. The company had incurred loss of $3.04 per share in the year-ago quarter. Revenues of $7.23 billion edged past the Zacks Consensus Estimate of $7 billion and were higher than the year-ago revenues of $3.29 billion (read: Tesla Experiences a Steep Fall: ETFs in Focus).

Early in January, Tesla revealed that it had produced 86,555 vehicles (61,394 Model 3 and 25,161 Model S and Model X combined) during Q4, up 8% from the all-time record set in the third quarter. It had delivered a total of 90,700 cars, including 63,150 Model 3. Notably, Model 3 became the best-selling passenger car in the United States in terms of revenues in both Q3 and Q4. With nearly 140,000 units sold, Model 3 was also the best-selling premium vehicle (including SUVs) in the United States in 2018. This was the first time in decades that an American carmaker succeeded in securing the top spot.

Overall, Tesla expects to deliver 360,000-400,000 vehicles in 2019, indicating growth of 45-65% from 2018. It expects its Model 3 production to reach a "sustained rate" of 7,000 vehicles a week by the end of the year. The company hopes to produce 500,000 vehicles a year in China by the last quarter of 2019 and the second quarter of 2020. It also expects to build 3,000 Model 3s per week at the Shanghai factory while production at Tesla's Fremont plant will rise to 7,000 Model 3s per week by the year end.

Though Tesla is optimistic that it will be able to post profit in the first quarter, it has warned of challenges such as logistics and global deliveries of its new Model 3 (see: all the Alternative Energy ETFs here).

The earnings miss pushed down shares of Tesla by more than 4% in aftermarket trading. The stock currently has a Zacks Rank #3 (Hold) and a VGM Score of C. It falls under a top-ranked Zacks industry (top 31%).

ETFs to Watch

Tesla earnings have put the spotlight on ETFs having substantial allocation to this luxury carmaker. We highlight five of them in detail below.

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 energy, automation and manufacturing, materials, and transportation. This approach results in a basket of 36 stocks, with TSLA occupying the second spot with 10.2%. The product has accumulated $163.6 million in its asset base and charges 75 bps in fees per year. It sees lower volume of about 36,000 shares a day (read: 5 ETFs Hit By NVIDIA's Revenue Guidance Cut).

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 36 securities in its basket, with Tesla occupying the top position, accounting for 8.7% share. The product has accumulated $1.3 billion in its asset base and trades in a good volume of about 354,000 shares. Expense ratio comes in at 0.75%.

First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN

This fund tracks the Nasdaq Clean Edge Green Energy Index and manages assets worth $89.7 million. It charges 60 bps in fees per year while trading in a light volume of around 14,000 shares per day. In total, the product holds 39 U.S. securities with Tesla Motors taking the second spot at 7.6%. It has a Zacks ETF Rank #3 with a High risk outlook.

ARK Web x.0 ETF ARKW

This is an actively managed fund focusing on companies that are expected to benefit from the shift in technology infrastructure to the cloud, enabling mobile, new and local services. The fund holds 36 stocks in its basket, with Tesla occupying the top position at 7%. The ETF has amassed $443 million in its asset base and trades in a good average daily volume of around 156,000 shares. Expense ratio comes in at 0.75% (read: 8 Top Active ETFs of 2018).

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 30 stocks in its basket with AUM of $85.3 million while charging 63 bps in fees per year. Average daily volume is paltry at about 5,000 shares. Tesla occupies the fifth position in the basket, with 8.4% allocation. In terms of country exposure, the fund is skewed toward the United States with 67.4% share, while Denmark and China round off the top three spots.

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