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ETFs to Watch as Tesla Misses on Q3 Deliveries

Sweta Killa

Tesla Motors TSLA disappointed investors by reporting weaker-than-expected deliveries for the third quarter. The company delivered record 97,000 (79,600 Model 3 and 17,400 Model S and X) vehicles, which is higher than 84,000 vehicles delivered in the year-ago quarter. However, the number fell short of analysts’ expectation of 99,000 polled by FactSet.

The electric carmaker said that it achieved "record" net orders in the third quarter and is seeing an increase in its order backlog in the current quarter. Nearly all of its Model 3 orders came from people who did not hold a reservation, "solidifying the transition to generating strong organic demand."

Overall, Tesla continues to deliver 360,000-400,000 vehicles in 2019, indicating growth of 45-65% from 2018. It hopes to produce 500,000 vehicles a year globally in the 12-month period ending Jun 30, 2020 and reaffirmed a target of producing 10,000 vehicles per week by the end of 2019. The company also continues to target 25% non-GAAP gross margin on Model S, Model X and Model 3 vehicles (see: all the Alternative Energy ETFs here).

Further, the company is likely to break even in the third quarter and return to profitability in the fourth quarter. Tesla remains on track to start local production of Model 3 in China by the end of the year.

Following the data release, shares of TSLA tumbled nearly 6% in after-hours trading. Tesla currently has a Zacks Rank #3 (Hold) and VGM Score of C. It belongs to a top-ranked Zacks industry (in the top 45%).

ETFs to Watch

The weak deliveries data has put the spotlight on ETFs having substantial allocation to this luxury carmaker. We have highlighted five of them below.

ARK Innovation ETF ARKK

This is an actively managed fund seeking long-term capital appreciation by investing in companies that benefit from the development of new products or services, technological improvements and advancements in scientific research relating to the areas of DNA technologies (Genomic Revolution), industrial innovation in energy, automation and manufacturing (Industrial Innovation), the increased use of shared technology, infrastructure and services (Next Generation Internet), and technologies that make financial services more efficient. In total, the fund holds 39 securities in its basket with Tesla occupying the top position, accounting for 13.1% share. The product has gathered $1.5 billion in its asset base and trades in a good volume of about 299,000 shares. Expense ratio comes in at 0.75%.

ARK Industrial Innovation ETF ARKQ

This is also an actively managed ETF seeking long-term capital appreciation by investing in companies that benefit from the development of new products or services as well as 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 top spot with 12.3% share. The product has accumulated $145.4 million in its asset base and charges 75 bps in fees per year. It sees a lower volume of about 24,000 shares a day.

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 39 stocks in its basket with Tesla occupying the top position at 12.3%. The ETF has amassed $352.3 million in its asset base and trades in a good average daily volume of around 83,000 shares. Expense ratio comes in at 0.75% (read: Trump May Be Re-Elected: Best ETFs in His Current Term).

VanEck Vectors Low Carbon Energy ETF SMOG

This ETF tracks the Ardour Global Index Extra Liquid, which focuses on the performance of low carbon energy companies primarily engaged in alternative energy. It holds about 30 stocks in its basket with AUM of $87.2 million while charging 63 bps in fees per year. Average daily volume is paltry at about 4,000 shares. Tesla occupies the top position in the basket with 10.7% allocation. In terms of country exposure, the fund is skewed toward the United States with 68.7% share while Denmark and China round off the next two spots.

First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN

This fund tracks the Nasdaq Clean Edge Green Energy Index and manages assets worth $111.3 million. It charges 60 bps in fees per year while trading in a light volume of around 17,000 shares per day. In total, the product holds 42 securities with Tesla Motors taking the top spot at 8.1%. It has a Zacks ETF Rank #4 (Sell) with a High risk outlook (read: Clean Energy ETFs Riding Higher).

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