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Wall Street Parties as Tesla Turns to a Profit: ETFs to Soar

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After the closing bell on Wednesday, electric carmaker Tesla Motors (TSLA - Free Report) surprised Wall Street and investors with a huge earnings beat. It not only posted its first quarterly profit in three years, but also ended a streak of billion-dollar losses and manufacturing delays.

Tesla achieved record vehicle production, deliveries and revenue in the fiscal third quarter and expects to be profitable again in the fourth quarter as it is ramping up production of the new models. These wiped out all the concerns over the company’s future growth, sending shares of TSLA higher by more than 6% in aftermarket hours on elevated volume (read: What's In Store for Tesla ETFs in Q3 Earnings?).

Tesla Q3 Earnings in Focus

The automaker swung to a profit of 15 cents per share while the Zacks Consensus Estimate was of a loss of 64 cents. Revenues climbed 145% year over year to $2.3 billion and edged past the Zacks Consensus Estimate of $2.13 billion. Robust results were driven by $139 million in sales of California zero emission vehicle credits.

Tesla already reported the fastest vehicle sales growth for the third quarter since 2013 early this month and updated the number slightly with its earnings release. It delivered a record 24,821 vehicles (16.047 Model S and 8,774 Model X) during Q3, up 72% from Q2 and 114% from the year-ago quarter while achieved record production of 25,185 vehicles, up 37% from Q2 and 92% from the year-ago quarter.

The company expects Q4 deliveries to be “at or slightly above Q3” and remains on track to deliver 50,000 vehicles in the second half of the year. Additionally, the company expects to increase its delivery from 80,000 cars this year to 500,000 cars by 2018 (see: all the Alternative Energy ETFs here).

The electric carmaker is on track for its production and delivery of Model 3 in late 2017. Further, the Gigafactory also remains on track to begin cell production later this year for use initially in the energy storage products and later to support volume production and deliveries of Model 3 in the second half of 2017.

ETFs to Watch

Given the smooth after-market trading, investors may be encouraged to stock up ETFs having a substantial allocation to this luxury carmaker. Below we highlight four ETFs that could be great plays for investors to tap Tesla in the coming days:

VanEck Vectors Global Alternative Energy ETF (GEX - Free Report)

This ETF tracks the Ardour Global Index Extra Liquid, focusing on global companies that are primarily engaged in the business of alternative energy. The fund holds about 32 stocks in its basket with AUM of $82.5 million while charging 62 bps in fees per year. Average daily volume is paltry at about 4,000 shares. Tesla Motors occupies the top position in the basket with 10.3% allocation. In terms of country exposure, the fund is skewed toward the U.S. with 52.5% share while China and Denmark round off the top three spots with a nearly double-digit allocation each.

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, technological improvement and advancements in scientific research related to robotics, energy storage, innovative materials, alternative energy sources, infrastructure development, space exploration, autonomous vehicles and 3D printing. This approach results in a basket of 39 stocks, with TSLA occupying the second spot with 8% share. The product has accumulated $15.9 million in its asset base and charges 75 bps in fees per year. It sees a paltry volume of about 1,000 shares a day.

First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN - Free Report)

This fund follows the Nasdaq Clean Edge Green Energy Index and manages assets worth $51.3 million. It charges 60 bps in fees per year while trades in a light volume of around 10,000 shares per day. In total, the product holds 38 U.S. securities with Tesla Motors taking the third spot in the basket at 7.7%. Technology and industrial firms dominate this ETF, accounting for 29.1% and 27.6% of the assets, respectively, while oil & gas and utilities round off the next two spots with a double-digit allocation each (read: What Lies Ahead for Alternative Energy ETFs?).

ARK Innovation ETF (ARKK - Free Report)

Like ARKQ, this is also an actively managed fund and follows the same strategy but provides exposure to genomic companies, industrial innovation companies or Web x.0 companies. In total, the fund holds 46 securities in its basket with Tesla occupying the top position holding 7.4% share. The product has accumulated $12.2 million in its asset base and trades in a paltry volume of about 3,000 shares. Expense ratio comes in at 0.75%.

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