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Tesla Poised to Beat on Q3 Earnings: ETFs to Buy

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Electric carmaker Tesla Motors TSLA is scheduled to report third-quarter 2021 results on Oct 20 after market close. Let’s take a closer look at its fundamentals ahead of the earnings release.

Over the past three months, Tesla has been on a solid ride, having gained 35%, more than four times the industry’s average gain of 8.5%. The trend might continue given the higher chances of earnings beat and positive earnings revisions, which are generally a precursor to an earnings beat ahead of its Q3 report.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Earnings Whispers

Tesla has a Zacks Rank #1 (Strong Buy) and an Earnings ESP of +15.68%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The electric carmaker saw positive earnings estimate revision of 10 cents over the past 30 days. Analysts increasing estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The earnings track is robust for the company, which delivered a four-quarter average earnings surprise of 26.48%. Additionally, the Zacks Consensus Estimate for the third quarter indicates substantial year-over-year growth of 77.6% for earnings and 50.1% for revenues (see: all the Alternative Energy ETFs here).

Tesla, Inc. Price, Consensus and EPS Surprise

Tesla, Inc. Price, Consensus and EPS Surprise
Tesla, Inc. Price, Consensus and EPS Surprise

Tesla, Inc. price-consensus-eps-surprise-chart | Tesla, Inc. Quote

Tesla has a top Growth Score of A and belongs to a bottom-ranked Zacks industry (in the bottom 29%). The Zacks Consensus Estimate for the average target price is $687.63, with nearly 43% of the analysts giving a Strong Buy or a Buy rating ahead of the company’s earnings.

While Tesla is poised for robust growth, its valuation remains high. The stock has a P/E ratio of 158.52 versus the industry average of 15.82.

Strong Q3 Production

Earlier this month, Tesla reported another quarter of record deliveries, underscoring its strong growth amid the global automotive semiconductor shortage that is roiling car production across the globe.

The company delivered a record 241,300 (232,025 Model 3 and Y, and 9,275 Model S and X) vehicles. Deliveries were up 73% from the year-ago quarter and 20% from the prior quarter. This marked the sixth consecutive quarter-over-quarter gain. The electric carmaker produced 237,823 (228,882 Model 3 and Y, and 8,941 Model S and X) vehicles during the quarter (read: ETFs to Buy on Tesla Record Q3 Delivery Numbers).

In China,demand is still recovering and EV competition is coming from all angles. Tesla’s ability to navigate these challenges in the third quarter is impressive. With this, Tesla has sold around 627,300 vehicles so far this year and is on track to soundly beat last year's total of 499,550.

ETFs to Watch

Given this, ETFs having the highest allocation to this luxury carmaker will be in focus going into its earnings announcement. These funds would be the potential movers if Tesla surprises the market.

Simplify Volt Robocar Disruption and Tech ETF VCAR

This is an actively managed ETF seeking concentrated exposure to the leader of autonomous driving technology and then enhancing the concentrated exposure with options. It is heavily exposed to the Tesla stock and Tesla call options at 25% share. The fund seeks to boost its performance during extreme moves in Tesla, charging investors 0.95% in annual fees. It has accumulated $1.8 million in its asset base while trades in an average daily volume of 1,000 shares (read: Chip Crunch Hit US Auto Sales in Q3: ETFs, Stocks in Focus).

Consumer Discretionary Select Sector SPDR Fund XLY

This product offers exposure to the broad consumer discretionary space by tracking the Consumer Discretionary Select Sector Index. It is the largest and most-popular product in this space, with AUM of $20.3 billion and an average daily volume of around 4.7 million shares. Holding 63 securities in its basket, Tesla takes the second spot with 16.4% of assets. The fund charges 12 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

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 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 46 stocks, with TSLA occupying the top spot with an 11.3% share. The product has accumulated $2.5 billion in its asset base and charges 75 bps in fees per year. It trades in volume of 292,000 shares a day on average.

ARK Next Generation Internet 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 48 stocks in its basket with Tesla occupying the top position at 10%. The ETF has amassed $5.2 billion in its asset base and charges 79 bps in annual fees. It trades in an average daily volume of 650,000 shares (read: Here's Why Internet ETFs Are Sizzling With Opportunities).

ARK Innovation ETF ARKK

This is an actively managed fund investing in companies that benefit from the development of new products or services, technological improvements and advancements in scientific research. In total, the fund holds 51 securities in its basket with Tesla occupying the top position, accounting for a 10% share. The product has gathered $20.3 billion in its asset base and charges 75 bps in fees per year from investors. It trades in a volume of 5.4 million shares per day on average.

MicroSectors FANG+ ETN FNGS

This ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar weighted index, designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 equal-weighted stocks in its basket with Tesla accounting for 10% share. The product has accumulated $76.5 million in its asset base and charges 58 bps in annual fees. It trades in an average daily volume of 32,000 shares and has a Zacks ETF Rank #3 (read: Investors Return to ETFs: 5 Hot Picks of Last Week).


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Tesla, Inc. (TSLA) : Free Stock Analysis Report

Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports

ARK Next Generation Internet ETF (ARKW): ETF Research Reports

ARK Autonomous Technology & Robotics ETF (ARKQ): ETF Research Reports

ARK Innovation ETF (ARKK): ETF Research Reports

MicroSectors FANG ETN (FNGS): ETF Research Reports

Simplify Volt Robocar Disruption and Tech ETF (VCAR): ETF Research Reports

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