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Tesla Poised to Beat on Q2 Earnings: ETFs in Focus

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Electric carmaker Tesla Motors (TSLA - Free Report) is scheduled to report second-quarter 2021 results on Jul 26 after market close. Let’s take a closer look at its fundamentals ahead of the earnings release.

Tesla has been on a rough journey over the past three months, having lost 11%, more than double the industry’s decline of 2.7%. The trend might reverse if the luxury carmaker comes up with an earnings beat this quarter. The company has seen positive earnings revisions, which are generally a precursor to an earnings beat, ahead of its Q2 report.

Zacks Investment Research
Image Source: Zacks Investment Research

Earnings Whispers

Tesla has a Zacks Rank #2 (Buy) and an Earnings ESP of +5.85%. 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 a penny 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 147.4%. Additionally, the Zacks Consensus Estimate for the second quarter indicates substantial year-over-year growth of 104.5% for earnings and 88.7% 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-eps-surprise-chart | Tesla, Inc. Quote

Tesla has a top Growth Score of A and belongs to a top-ranked Zacks industry (in the top 17%). The Zacks Consensus Estimate for the average target price is $660.9 with nearly 46% 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 152.64 versus the industry average of 15.14.

Strong Q2 Production

Earlier this month, Tesla reported record deliveries for second-quarter 2021. It delivered a record 201,250 (199,360 Model 3 and Y, and 1,890 Model S and X) vehicles. Deliveries were up 121%, the highest growth rate in two years, from the year-ago quarter and an acceleration from the 109% year-over-year growth reported in Q1. In fact, Tesla logged its best quarter of deliveries ever.

The electric carmaker produced 206,421 (204,081 Model 3 and Y, and 2,340 Model S and X) vehicles during the quarter (read: Tesla Breaks Record on Q2 Deliveries: ETFs to Tap).

Including Q2 deliveries, Tesla has delivered a total of 386,050 cars so far in 2021. Tesla did not announce an official guidance for this year but stated in its Q1 Update Letter that it expects “to achieve 50% average annual growth in vehicle deliveries in the coming years.” The ramp-up of production at Tesla's Shanghai Gigafactory, which began delivering vehicles to customers in China in January last year, and its forthcoming facilities in Berlin and Texas are likely to help it in achieving this goal.

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 - Free Report)

This is an actively managed ETF seeking concentrated exposure to the leader of autonomous driving technology. 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 up in Tesla, charging investors 1.09% in annual fees. It has accumulated $2 million in its asset base while trades in an average daily volume of 3,000 shares.

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 99 stocks in its basket with Tesla occupying the top position at 15.3% allocation. The fund has amassed $686.7 million in its asset base while trades in a volume of about 13,000 shares. It charges 43 bps in annual fees and has a Zacks ETF Rank #3 (Hold) 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 $19.6 billion and an average daily volume of around 3.9 million shares. Holding 63 securities in its basket, Tesla takes the second spot with 12.9% of assets. The fund charges 12 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Play Revenue Growth With 5 ETFs As Earnings Hopes Too Upbeat.

ARK Industrial Innovation 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 45 stocks, with TSLA occupying the top spot at 11% 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 381,000 shares a day on average.

ARK Innovation ETF (ARKK - Free Report)

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 50 securities in its basket with Tesla occupying the top position, accounting for 10.1% share. The product has gathered $22.8 billion in its asset base and charges 75 bps in fees per year from investors. It trades in a volume of 9.1 million shares per day on average (read: Ride the Renewed Meme Stock Wave With This New ETF).

ARK Next Generation Internet ETF (ARKW - Free Report)

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 50 stocks in its basket with Tesla occupying the top position at 10.1%. The ETF has amassed $5.8 billion in its asset base and charges 79 bps in annual fees. It trades in an average daily volume of 981,000 shares.

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 $74.8 million in its asset base and charges 58 bps in annual fees. It trades in an average daily volume of 35.000 shares and has a Zacks ETF Rank #3.