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Tesla Hits Brake After Dismal Q4 Earnings: ETFs to Watch

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After the closing bell on Wednesday, Tesla Motors (TSLA - Free Report) disappointed investors when it released Q4 earnings. The electric carmaker lagged the estimates on earnings but beat on the top line. The company missed earnings estimates for the first time since the June 2019 quarter though the results represent the sixth straight profitable quarter.

Q4 Earnings in Focus

Adjusted earnings per share came in at 80 cents, easily beating the Zacks Consensus Estimate of 90 cents. Revenues jumped 46% year over year to a record $10.74 billion and edged past the Zacks Consensus Estimate of $10.13 billion.

Earlier this month, Tesla reported better-than-expected deliveries for the fourth quarter. The company produced 179,757 (163,660 Model 3 and Y, and 16,097 Model S and X) vehicles and delivered a record 180,570 (161,650 Model 3 and Y, and 18,920 Model S and X) vehicles. The strong data came on the back of a rise in demand for its more affordable and newer models. Notably, Model 3 demand has been robust over the past 10 months despite the COVID-19 pandemic (read: 5 ETFs Set to Soar on Tesla's Robust Q4 Deliveries).

For the full year, the electric carmaker made 499,550 (442,511 Model 3 and Y, and 57,039 Model S and X) deliveries, up 36% year over year but slightly short of the 500,000 target due to the pandemic. It produced 509,737 (454,932 Model 3 and Y, and 54,805 Model S and X) vehicles in 2020, up 71% year over year.

Tesla expects another year of strong growth in vehicle deliveries as it has been aggressively expanding its vehicle production capacity. It expects to achieve 50% average annual growth in vehicle deliveries in the coming years. Volumes may even grow at a faster rate in some of the years and 2021 could be one of them, the company projected.

Given the dismal results, shares of Tesla tumbled as much as 8% in aftermarket trading on elevated volumes. Also, it is down more than 6% in pre-market trade at the time of writing. The stock currently has a Zacks Rank #3 (Hold) and Growth Score of A. It belongs to a top-ranked Zacks industry (in the top 15%).

ETFs to Watch

The ETFs having a substantial allocation to this luxury carmaker has been in focus post dismal results and the stock’s decline. We highlight six of them in detail below.

iShares U.S. Consumer Goods ETF (IYK - Free Report)

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 97 stocks in its basket with Tesla occupying the top position at 20.7% allocation. The fund has amassed $767.8 million in its asset base while trades in a volume of about 27,000 shares. It charges 43 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.

Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)

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 nearly $19.3 billion and an average daily volume of around 3.1 million shares. Holding 61 securities in its basket, Tesla takes the second spot with 18.5% of assets. The fund charges 0.13% in expense ratio and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Cyclical ETFs in Spotlight on Biden's American Rescue Plan).

Franklin Intelligent Machines ETF (IQM - Free Report)

This ETF provides access to companies developing technologies that support machine learning as well as those using automated processes. It holds 58 stocks in its basket with Tesla making up for the top firm at 11.9% of assets. The product has accumulated $11.9 million in its asset base and charges 50 bps in annual fees. It trades in a light volume of 4,000 shares a day on average.

ARK Autonomous Technology & Robotics ETF (ARKQ - Free Report)

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 11.2% share. The product has accumulated $2.8 billion in its asset base and charges 75 bps in fees per year. It trades in volume of 877,000 shares a day, on average (read: 5 Top-Performing ARK ETFs Worth Your Attention Now).

MicroSectors FANG+ ETN (FNGS - Free Report)

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 $70.6 million in its asset base and charges 58 bps in annual fees. It trades in an average daily volume of 12,000 shares and has a Zacks ETF Rank #3.

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