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What Lies Ahead of Tesla ETFs as It Fails to Make It to S&P 500?
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Electric carmaker Tesla’s (TSLA - Free Report) ’s dream journey stalled on Sep 3 as its shares suffered some awful trading sessions since then. Tesla slumped 11% in the past week versus 2.5% decline in the S&P 500. Most importantly, the Tesla stock plunged 21% on Sep 8, marking its biggest daily percentage drop as the electric carmaker was excluded from the group of companies that are being added to the S&P 500.
The S&P’s main conditions for inclusion are that “the concerned company must have a market cap of at least $8.2 billion, be headquartered in the United States, have most of its shares in public hands and that the sum of its last four quarters of earnings must be positive.”
However, clearing the criteria does not ensure entrance into the index as Tesla has failed this time. Investors had high hopes on the carmaker to get a place in the key U.S. index. Even after the crash, Tesla is up 345.5% this year versus 3.4% gains in the S&P 500.
What Lies Ahead of Tesla?
The median price target on the stock is $300 — well below its Sep 1 record high of $502.49, according to Refinitiv data, as quoted on a source. The Zacks Consensus Estimate for the short-term price target is $267.98 with 21 analysts offering the price target. This implies a 28.1% decline from the current price of $372.72 per share as of Sep 11.
Notably, the highest short-term price target is $550 while the lowest short-term price target is $60. Of the 21 analysts covering the stock, 12 provided a “Hold” rating, followed by a “Strong Sell” from five and “Strong Buy” from four.
Meanwhile, “sources told Reuters recently that Tesla is planning to export Model 3 vehicles made in China to the Asian and European markets. The automaker is expanding its manufacturing base in China to make Model Y sports-utility vehicles and adding lines to make more battery packs, electric motors and motor controllers,” as quoted on a source.
Chief executive of Tesla, Elon Musk, also told his staff to boost production of the Tesla Semi commercial truck. Investors also are anticipating that Musk will reveal the new “million-mile” battery technology that could deliver longer life, lower costs and better range, per Reuters. Plus, Tesla’s presence in the emerging solar power industry may prove to be beneficial over the long term.
Tesla investors and analysts are now eyeing the company’s “Battery Day” event on Sep 22, with Elon Musk expected to tout improvements in battery performance. That said, we would like note that Tesla has missed deadlines before on several of its upbeat announcements.
Against this backdrop, one can take a wait and see approach with Tesla as the stock currently has a Zacks Rank #3 (Hold). Investors intending to tap the long-term potential in the stock may play the following ETFs as the basket approach is less risky.
ETFs in Focus
MicroSectors FANG+ ETN (FNGS — Tesla accounts for about 10% share.
ARK Web x.0 ETF (ARKW - Free Report) —Tesla occupies the top position at 9.7%.
ARK Autonomous Technology & Robotics ETF (ARKQ - Free Report) — Tesla occupies the top spot with 9.4% share.
First Trust NASDAQ Global Auto ETF (CARZ - Free Report) ) — The fund invests about 10% weight in Tesla.
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What Lies Ahead of Tesla ETFs as It Fails to Make It to S&P 500?
Electric carmaker Tesla’s (TSLA - Free Report) ’s dream journey stalled on Sep 3 as its shares suffered some awful trading sessions since then. Tesla slumped 11% in the past week versus 2.5% decline in the S&P 500. Most importantly, the Tesla stock plunged 21% on Sep 8, marking its biggest daily percentage drop as the electric carmaker was excluded from the group of companies that are being added to the S&P 500.
The S&P’s main conditions for inclusion are that “the concerned company must have a market cap of at least $8.2 billion, be headquartered in the United States, have most of its shares in public hands and that the sum of its last four quarters of earnings must be positive.”
However, clearing the criteria does not ensure entrance into the index as Tesla has failed this time. Investors had high hopes on the carmaker to get a place in the key U.S. index. Even after the crash, Tesla is up 345.5% this year versus 3.4% gains in the S&P 500.
What Lies Ahead of Tesla?
The median price target on the stock is $300 — well below its Sep 1 record high of $502.49, according to Refinitiv data, as quoted on a source. The Zacks Consensus Estimate for the short-term price target is $267.98 with 21 analysts offering the price target. This implies a 28.1% decline from the current price of $372.72 per share as of Sep 11.
Notably, the highest short-term price target is $550 while the lowest short-term price target is $60. Of the 21 analysts covering the stock, 12 provided a “Hold” rating, followed by a “Strong Sell” from five and “Strong Buy” from four.
Meanwhile, “sources told Reuters recently that Tesla is planning to export Model 3 vehicles made in China to the Asian and European markets. The automaker is expanding its manufacturing base in China to make Model Y sports-utility vehicles and adding lines to make more battery packs, electric motors and motor controllers,” as quoted on a source.
Chief executive of Tesla, Elon Musk, also told his staff to boost production of the Tesla Semi commercial truck. Investors also are anticipating that Musk will reveal the new “million-mile” battery technology that could deliver longer life, lower costs and better range, per Reuters. Plus, Tesla’s presence in the emerging solar power industry may prove to be beneficial over the long term.
Tesla investors and analysts are now eyeing the company’s “Battery Day” event on Sep 22, with Elon Musk expected to tout improvements in battery performance. That said, we would like note that Tesla has missed deadlines before on several of its upbeat announcements.
Against this backdrop, one can take a wait and see approach with Tesla as the stock currently has a Zacks Rank #3 (Hold). Investors intending to tap the long-term potential in the stock may play the following ETFs as the basket approach is less risky.
ETFs in Focus
MicroSectors FANG+ ETN (FNGS — Tesla accounts for about 10% share.
ARK Web x.0 ETF (ARKW - Free Report) —Tesla occupies the top position at 9.7%.
ARK Autonomous Technology & Robotics ETF (ARKQ - Free Report) — Tesla occupies the top spot with 9.4% share.
First Trust NASDAQ Global Auto ETF (CARZ - Free Report) ) — The fund invests about 10% weight in Tesla.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>