Electric carmaker Tesla Motors TSLA is scheduled to report third-quarter 2020 results on Oct 21 after market close. Let’s take a closer look at its fundamentals ahead of earnings release.
Though the stock’s hottest run saw a pause in September after the completion of a 5-for-1 stock split, failure to make it to the S&P 500 Index and a disappointing Battery Day, shares are up more than 37% over the past three months, outperforming the industry’s growth of 17%. From a year-to-date look, Tesla is the second-best performing stock in the Nasdaq 100, having gained 425%, trailing only Zoom Video Communication’s ZM with more than 700% gain (read: Tesla's 'Battery Day': Pain or Gain for ETFs Over Long Term?).
The solid trend is likely to continue as the luxury carmaker has reasonable chances of beating estimates this quarter and has seen positive earnings revisions, which are generally a precursor to an earnings beat, ahead of its Q3 report.
Tesla has a Zacks Rank #3 (Hold) and an Earnings ESP of +3.67%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 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 solid 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 645.16%. Additionally, the Zacks Consensus Estimate for the third quarter indicates substantial year-over-year growth of 48.6% for earnings and 30.1% for revenues (see: all the Alternative Energy ETFs here).
Further, one analyst, Wedbush, has raised the price target on Tesla ahead of the Q3 earnings announcement. The analyst believes “Tesla's improved manufacturing efficiency and shining Giga 3 success in China will be on full display later this week and lead to another strong bottom-line performance which should beat the Street.” Tesla has a VGM Score of B and belongs to a top-ranked Zacks industry (in the top 20%).
The Zacks Consensus Estimate for the average target price is $335.20 with nearly 32% of the analysts giving a Strong Buy or a Buy rating ahead of the company’s earnings.
Strong Q3 Production
Earlier this month, Tesla reported record deliveries for the third quarter. The company produced 145,036 (128,044 Model 3 and Y, and 16,992 Model S and X) vehicles and delivered 139.300 (124,100 Model 3 and Y, and 15,200 Model S and X) vehicles. The deliveries jumped 54% from Q2 and topped the previous record of 112,000 set in the fourth quarter of 2019 while production increased 76% compared with Q2. Robust performance came on the back of higher demand for its mass-produced Model 3 sedans (read: Will Tesla ETFs Regain Momentum Post Record Q3 Deliveries?).
For the full year, Tesla is on pace to deliver about 500,000 vehicles, up 36% from last year. However, to meet this guidance, the company has to deliver a blowout Q4 quarter with 181,650 deliveries given that 318.350 cars have been delivered this year.
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.
iShares U.S. Consumer Goods ETF IYK
This ETF offers exposure to U.S. companies that produce a wide range of consumer goods, including food, automobiles, and household goods by tracking the Dow Jones U.S. Consumer Goods Index. It holds about 96 stocks in its basket with Tesla occupying the second position at 11.8% allocation. The fund has amassed $605.4 million in its asset base while trades in a volume of about 42,000 shares. It charges 43 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
SPDR NYSE Technology ETF XNTK
This product provides exposure to the purely electronics-based technology companies by tracking the NYSE Technology Index. It holds 35 stocks in its basket with Tesla taking the top spot with 11.2% share. The ETF has amassed $497.9 million and charges 35 bps in annual fees. It trades in average daily volume of 28,000 shares and has a Zacks ETF Rank #2 (Buy).
ARK Autonomous Technology & Robotics 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 39 stocks, with TSLA occupying the top spot with 10.2% share. The product has accumulated $632.3 million in its asset base and charges 75 bps in fees per year. It trades in volume of 255,000 shares a day on average.
Franklin Intelligent Machines ETF IQM
This ETF provides access to companies developing technologies that support machine learning as well as those using automated processes. It holds 63 stocks in its basket with Tesla making up for the top firm at 10.1% of assets. The product has accumulated $3.4 million in its asset base since its debut in late February and charges 50 bps in annual fees. It trades in light volume of 2,000 shares a 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 $56 million in its asset base and charges 58 bps in annual fees. It trades in average daily volume of 25,000 shares and has a Zacks ETF Rank #3 (read: ETFs to Win From the Netflix, Amazon Q3 Earnings Faceoff).
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 52 stocks in its basket with Tesla occupying the top position at 9.8%. The ETF has amassed $2.4 billion in its asset base and charges 76 bps in annual fees. It trades in average daily volume of 738,000 shares.
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Click to get this free report Tesla, Inc. (TSLA) : Free Stock Analysis Report ARK Autonomous Technology Robotics ETF (ARKQ): ETF Research Reports ARK Next Generation Internet ETF (ARKW): ETF Research Reports iShares U.S. Consumer Goods ETF (IYK): ETF Research Reports SPDR NYSE Technology ETF (XNTK): ETF Research Reports Zoom Video Communications, Inc. (ZM) : Free Stock Analysis Report Franklin Intelligent Machines ETF (IQM): ETF Research Reports MICRSFANG (FNGS): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research 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