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Tesla Disappoints in Q1: ETFs in Focus

Sweta Killa

After the closing bell on Wednesday, Tesla Motors TSLA reported dismal results for the first quarter of 2019. The electric carmaker reported huge loss, missing the estimates. The loss came after two consecutive profitable quarters, which marked the first time that has happened in Tesla's 15-year history. Tesla also lagged on revenue estimates.

Adjusted loss per share came in at $2.90, much wider than the Zacks Consensus Estimate of loss of $1.21. The company had incurred loss of $3.35 per share in the year-ago quarter. Revenues of $4.54 billion fell short of the Zacks Consensus Estimate of $5.78 billion but came in higher than the year-ago figure of $3.41 billion.

Early in April, Tesla revealed that it had produced 77,100 vehicles (62,950 Model 3 and 14,150 Model S and Model X combined) during the quarter and delivered 63,000 (50,900 Model 3 and 12,100 Model S and X) vehicles. Though deliveries were 110% higher than the year-ago quarter, it fell 31% from the fourth quarter. The electric car maker struggled to ship its Model 3 car to customers in Europe and China for the first time despite the massive increase in deliveries in these two countries, which at times exceeded 5x that of the prior peak delivery levels. This has caused a large number of vehicle deliveries to shift to the second quarter (read: Tesla ETFs in Focus on Weak Q1 Delivery Data).

Notably, Model 3 was yet again the best-selling premium car in the United States in the first quarter.

Overall, Tesla reaffirmed that it will deliver 360,000-400,000 vehicles in 2019, indicating growth of 45-65% from 2018. The company hopes to produce 500,000 vehicles a year globally in the 12-month period ending Jun 30, 2020. It continues to target a 25% non-GAAP gross margin on Model S, Model X and Model 3 vehicles. For the second quarter, Tesla expects to deliver 90,000-100,000 vehicles.

Though Tesla expects to incur a loss in the second quarter, it predicts a return to profit in the third (see: all the Alternative Energy ETFs here).

The earnings miss pushed down shares of Tesla by as much as 2.7% in aftermarket trading. The stock currently has a Zacks Rank #5 (Strong Sell) and a VGM Score of C. It belongs to a bottom-ranked Zacks industry (bottom 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 35 stocks, with TSLA occupying the third spot with 9.7%. The product has accumulated $186.5 million in its asset base and charges 75 bps in fees per year. It sees lower volume of about 27,000 shares a day (read: Bet on NVIDIA's Largest-Ever Deal With These ETFs).

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 $95.1 million while charging 63 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% allocation. In terms of country exposure, the fund is skewed toward the United States with 65% share while Denmark and China round off the top three spots.

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 38 securities in its basket, with Tesla occupying the top position, accounting for 8.8% share. The product has accumulated $1.7 billion in its asset base and trades in a good volume of about 359,000 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 $104.3 million. It charges 60 bps in fees per year while trading in a light volume of around 15,000 shares per day. In total, the product holds 41 U.S. securities with Tesla Motors taking the fourth spot at 6.6%. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook (see: all the Alternative Energy ETFs here).

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 37 stocks in its basket with Tesla occupying the second position at 7.2%. The ETF has amassed $522.6 million in its asset base and trades in a good average daily volume of around 132,000 shares. Expense ratio comes in at 0.75%.