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Tesla Makes a Comeback: ETFs to Ride On

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Tesla TSLA is back on its winning track, with shares rallying 56.2% since Apr 2. While the latest Wall Street rally has renewed investors’ enthusiasm since the start of the month, the real push came from Credit Suisse’s upgrade of ratings on the electric-vehicle (EV) maker this week. Shares of Tesla surged 13% on Apr 13 and 9.1% on Apr 14.

Investors should note that Tesla’s shares were rallying massively before the coronavirus threat heightened. The stock has gained 65% so far this year, with a high of $968.99 hit on Feb 4 and low of $350.51 touched on Mar 18. As of Apr 14, the stock traded at $709.89.

Behind the Headline

Credit Suisse raised its rating on Tesla to “neutral” from “underperform,” as short-term changes in demand due to the novel coronavirus will disturb traditional automakers like General Motors (GM - Free Report) and Ford F in their gradual shift toward electric vehicles. Credit Suisse’s previous underperform rating was to reflect the rising competition in the EV space.

But coronavirus dealt a blow to the liquidity of other manufacturers who had plans for electrification over the long term. Tesla’s sole focus on the EV space makes it a winner now. Though Tesla had to shut down its California factory temporarily, furlough workers and cut salaries, it looks better-positioned than others for an expected V-shaped or U-shaped recovery.

Investors should also note that in early April, Tesla reported stronger-than-expected deliveries for the first quarter. The company produced 102,672 (87,282 Model 3 and Y, and 15,390 Model S and X) vehicles and delivered 88,400 (76,200 Model 3 and Y, and 12,200 Model S and X) vehicles. Though the delivery number is 21% down from the previous quarter, it is higher than 77,100 produced in the year-ago quarter (read: ETFs to Ride High on Tesla's Robust Q1 Delivery Numbers).

The robust numbers were attributed to “record levels of production” from the new Gigafactory in Shanghai, China, which began operations in late 2019. With the virus outlook improving in China and lockdowns lifted, Tesla’s Shanghai factory should report healthy production in the near term. The factory is on target to produce 150,000 vehicles this year.Tesla sold 10,160 vehicles in China in March, its largest monthly sales volume after entering China’s market, per data from the China Passenger Car Association.

ETFs in Focus

Tesla currently has a Zacks Rank #3 (Hold) and a Growth Score of A. Investors intending to tap the latest rally in the stock may tap the following ETFs.

MicroSectors FANG+ ETN (FNGS - Free Report) — Up 5.6% on Apr 14

Tesla accounts for about 10% share.

ARK Web x.0 ETF (ARKW - Free Report) — Up 5.0%

The fund holds 41 stocks in its basket, with Tesla occupying the top position at 10%.

ARK Autonomous Technology & Robotics ETF (ARKQ - Free Report) — Up 4.5%

Tesla occupies the top spot with more than 10% share. 

First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN - Free Report) — Up 4.3%

Tesla takes the top spot here with about 12% weight.

First Trust NASDAQ Global Auto ETF (CARZ - Free Report) — Up 3.69%

The fund invests more than 10% weight in Tesla.

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