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Tesla Rally Signals a Bigger Investment Story: ETFs to Consider

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Elon Musk looking to move Tesla’s identity beyond EVs may be precisely what the company and its investors need. Tesla (TSLA - Free Report) shares struggled at the start of the year, weighed down by slowing EV sales and softening demand. However, the sentiment has since shifted sharply, with the stock recently closing at record highs as investors rally around Musk’s robotaxi vision.

While investing in Tesla, shareholders are no longer betting solely on its EV business. They are buying into the company’s self-driving technology, its Optimus humanoid robots and to a large extent, Elon Musk himself. The key takeaway for investors remains clear: Tesla is a long-term play, not a vehicle for short-term bets.

As Musk steers the company beyond EVs, driverless taxis and robotics are becoming increasingly central to Tesla’s long-term narrative. As the EV market becomes more uncertain, this move toward “physical AI,” combined with the prospect of recurring revenues from self-driving technology, could support Tesla’s growth over time.

Robotaxi Trials Reignite Tesla Bulls

Per Tesla CEO Elon Musk, as quoted on CNBC, nearly six months after launching a pilot program with safety drivers, Tesla is now testing fully driverless vehicles in Austin, TX, with no occupants on board. The update sparked a rally in the stock, pushing Tesla’s market capitalization to about $1.63 trillion.

For bullish investors, the news signals that Tesla could be nearing a long-awaited milestone of transforming its current EV lineup into robotaxis via a software update, per the abovementioned CNBC article. According to another CNBC article, as of October, Tesla’s robotaxi fleet in Austin numbered fewer than 30 vehicles. While Musk had indicated plans to expand the fleet to 60 by the end of 2025.

From legacy automakers to startups, the EV pullback is broad and widespread. In such an environment, Tesla’s latest news gives investors plenty to cheer. However, challenges do remain.

Building for the Future, One Step at a Time

According to the Motley Fool, as quoted on Yahoo Finance, approvals from regulators are uneven, safety oversight is strict and winning public confidence will be gradual. While the robotaxi technology looks promising, the timeline for meaningful revenues remains uncertain.

Tesla positions Optimus, humanoid robots, as its next breakthrough. While still in early stages, it remains an exciting and closely watched innovation. However, it remains a long-term play. Per the abovementioned Yahoo Finance article, Optimus represents one of Tesla’s most asymmetric bets. If scaled successfully, it could tap markets beyond mobility, including labor, logistics, healthcare and services.

More on TSLA Stock

Tesla currently has an average brokerage recommendation (ABR) of 2.76 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations made by 41 brokerage firms. Of the 41 recommendations deriving the current ABR, 14 are Strong Buy, one is Buy and 16 are Hold. Strong Buy and Buy, respectively, account for 34.15% and 2.44% of all recommendations.

Based on short-term price targets offered by 34 analysts, the average price target for Tesla comes to $383.79, with the forecasts ranging from a low of $120.00 to a high of $600.00. Currently, TSLA stock is priced at $489.88 (as of market close on Dec. 16) and has a Zacks Rank #3 (Hold), along with a Growth and Momentum Score of B.

Tesla’s stock has gained about 28% year to date and about 14% month to date, indicating that the EV market slowdown and the stock fundamentals do not have a bearing on the stock price momentum.

The majority of analyst ratings remain at Strong Buy, Buy and Hold, outnumbering Strong Sell and Sell calls. This suggests brokerages are cautiously optimistic, willing to wait and see how the stock plays out, rather than turning outright bearish on the company.

ETFs to Consider

Here, we have highlighted ETFs with exposure to Tesla.

Simplify Volt TSLA Revolution ETF (TESL - Free Report) has an exposure of 53.32%.

Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) has an exposure of 22.39%.

Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report) has an exposure of 17.38%.

Vanguard Consumer Discretionary ETF (VCR - Free Report) has an exposure of 17.37%.

ARK Autonomous Technology & Robotics ETF (ARKQ - Free Report) has an exposure of 13.68%.

MicroSectors FANG+ ETN (FNGS - Free Report) has an exposure of 12.17%.

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