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Tesla to Drive These ETFs on Solid Outlook

Sweta Killa

After the closing bell on Wednesday, Tesla Motors TSLA reported better-than-expected results for the second quarter of 2017. Though the electric carmaker missed our earnings estimate, its loss was narrow than Wall Street expectations. Additionally, revenues more than doubled from a year-ago period and topped the estimates.

The company also reiterated its production target for the new Model 3 sedan and raised the production outlook for Model S, alleviating concerns over the Tesla production issues. All these have cheered investors, sending shares of TSLA higher as much as 8% in aftermarket hours on elevated volume.

Tesla Q2 in Focus

Adjusted loss per share came in at $2.04, wider than the Zacks Consensus Estimate of a loss of $2.00 but narrower than the Wall Street forecast for a loss of $1.82 per share. Revenues climbed 63% to $2.79 billion and edged past the Zacks Consensus Estimate of $2.55 billion (read: 4 Sector ETFs Winning on Revenue Growth).

Tesla delivered over 22,000 vehicles (12,000 Model S and 10,000 Model X) during Q2, up 53% from the year-ago quarter but down 12% from Q1. Management cited that deliveries were hit by a "severe" production shortfall of 100 kWh battery packs, which are made by using new technologies on new production lines.

The automaker is confident that Model 3 production will increase "exponentially" from around 100 cars in August and 1,500 in September to about 5,000 per week by the end of 2017. It also plans to increase Model 3 production to 10,000 vehicles per week at some point in 2018. Further, the company expects Model S and Model X deliveries to increase in the second half of this year.

ETFs to Watch

As Tesla is all about electric cars, its production and delivery plans matter the most to investors rather than earnings miss or beat. As a result, Tesla has seen smooth trading following its results and this trend is expected to continue in the ETF world for funds having substantial allocation to this luxury carmaker (see: all the Alternative Energy ETFs here).

Below we highlight five ETFs that could be great plays for investors to tap Tesla in the coming days.

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 $83.5 million while charging 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 9.9% allocation. In terms of country exposure, the fund is skewed toward the U.S. with 55% share, while Denmark and Germany round off the top three spots. It has gained 18.9% in the year-to-date time frame.

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 40 stocks, with TSLA occupying the top spot with 9.6% share. The product has accumulated $66.6 million in its asset base and charges 75 bps in fees per year. It sees a paltry volume of about 27,000 shares a day and has risen 33.8% so far this year.

First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN

This fund tracks the Nasdaq Clean Edge Green Energy Index and manages assets worth $77.6 million. It charges 60 bps in fees per year while trades in a light volume of around 19,000 shares per day. In total, the product holds 36 U.S. securities with Tesla Motors taking the fifth spot in the basket at 6.9%. Industrials firms dominate this ETF, accounting for 30.7% of the assets while technology, and oil & gas round off the next two spots with a double-digit allocation each. QCLN has gained 21.9% in the same time frame.

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 51 securities in its basket, with Tesla occupying the second position holding 6.1% share. The product has accumulated $85.8 million in its asset base and trades in a lower volume of about 36,000 shares. Expense ratio comes in at 0.75%. The ETF has surged 48.7% so far this year (read: ETF Winner of 1H17 and its Top 5 Stocks).

Global X Lithium 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 28 securities in its basket, Tesla takes the fourth spot with 5.7% share. American firms dominate the portfolio with 40% of assets while Chile and South Korea have a double-digit allocation each. From a sector look, the ETF is heavy on materials with 60% share, closely followed by consumer discretionary (14%), technology (13%) and industrials (12%). The fund has amassed $275.1 million in its asset base and trades in moderate volume of nearly 108,000 shares per day. Expense ratio comes in at 0.76% and year-to-date returns are 30.7% (read: How Tesla is Driving the Lithium ETF Higher).

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