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6 ETFs to Ride on Tesla's Trillion-Dollar Market Cap

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Tesla Motors (TSLA - Free Report) joined an exclusive club of mega-cap technology companies, which includes Apple (AAPL - Free Report) , Amazon.com (AMZN - Free Report) , Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) , after crossing the trillion-dollar in market capitalization for the first time. The stock jumped nearly 10% to reach $998.74 per share on Oct 25 following the biggest-ever order from Hertz.

The electric carmaker received an order for 100,000 of its electric vehicles, valued at $4.4 billion, from rental-car icon Hertz Global. The vehicles will be delivered through the end of 2022. The rally was also driven by the news that the company's Model 3 become the first electric vehicle to top monthly sales of new cars in Europe, beating stalwarts like the Renault Clio and Volkswagen Golf. Tesla sold 24,591 units of Model 3 in Europe in September, representing year-over-year growth of 58%.

Further, the company’s blowout Q3 results are driving its shares higher. Last week, Tesla posted record revenues and one of the strongest profit margins in the group's history. Adjusted earnings per share came in at $1.86, easily beating the Zacks Consensus Estimate of $1.39 and improving from the year-ago earnings of 76 cents. Revenues jumped 56.8% year over year to $13.76 billion and edged past the Zacks Consensus Estimate of $13.16 billion (read: Tesla Solid Q3 Earnings Put These ETFs in Focus).

Earlier in the 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.

The spate of good news has compelled a number of analysts on Wall Street to become more bullish on the stock. The stock saw a solid earnings estimate revision of 23 cents over the past seven days for this year with estimated growth of 149.5%. In particular, Morgan Stanley raised its price target on the Tesla stock to $1,200 from $900, representing one of the highest on Wall Street and reiterated an Overweight rating on it.

Tesla currently has a Zacks Rank #2 (Buy) and a Growth Score of B. The stock is up nearly 41% so far this year, outperforming the S&P 500's gain of 21.6%.

ETFs to Buy

We have highlighted six ETFs having a double-digit allocation to this luxury carmaker that could be compelling picks to tap Tesla’s trillion-dollar journey.

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 and 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 $1.9 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 - 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 $21.5 billion and an average daily volume of around 4.8 million shares. Holding 63 securities in its basket, Tesla takes the second spot with 17.3% of assets. The fund charges 12 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.

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 37 stocks, with TSLA occupying the top spot with an 11.3% share. The product has accumulated $2.6 billion in its asset base and charges 75 bps in fees per year. It trades in volume of 270,000 shares a day on average.

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 cloud, enabling mobile, new and local services. The fund holds 43 stocks in its basket with Tesla occupying the top position at 10%. The ETF has amassed $5.5 billion in its asset base and charges 79 bps in annual fees. It trades in an average daily volume of 633,000 shares (read: Here's Why Internet ETFs Are Sizzling With Opportunities).

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 45 securities in its basket with Tesla occupying the top position, accounting for a 10% share. The product has gathered $21.5 billion in its asset base and charges 75 bps in fees per year from investors. It trades in a volume of 5.2 million shares per day on average.

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 $80.4 million in its asset base and charges 58 bps in annual fees. It trades in an average daily volume of 33,000 shares and has a Zacks ETF Rank #3 (read: Investors Return to ETFs: 5 Hot Picks of Last Week).

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