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Tesla Deliveries Decline: ETFs in Focus

Elon Musk, CEO of Tesla Inc TSLA, is known for setting targets that his company mostly fails to meet. Of late, Tesla’s deliveries have been declining, owing to persistent production problems.


The company reported deliveries of over 22,000 vehicles in the second quarter of 2017 compared with 25,051 in the first quarter. This has further sparked fears among investors over the production outlook of the company’s cheaper Model 3 sedan. The decline in manufacturing was attributed to a shortage of battery packs.


As the news broke, shares of the company declined more than 7% on July 5, 2017, their biggest decline in over a year. Despite this sharp decline, shares of the company remain about 53% up so far this year.


Another concern shrouding Tesla’s growth outlook is the recent test results of Model S by Insurance Institute for Highway Safety (IIHS). In one of the tests conducted by IIHS, the small overlap front collision, the agency gave an “acceptable” rating to the car, its second highest rating possible. Per Dave Zuby, IIHS executive vice president and chief research officer, the agency maintained its rating in the second test conducted as well, after Tesla had reportedly resolved the issue.


Tesla Inc currently has a Zacks Rank #3 (Hold). Let us now discuss a few ETFs that have a high exposure to Tesla (see all Alternative Energy ETFs here).


ARK Industrial Innovation ETF ARKQ


This fund does not track any index in particular as it is an actively managed ETF seeking long-term capital appreciation. It looks for companies that stand to gain from the development of new products or services, or technological improvement and advancements in scientific research.


The fund has AUM of $57.2 million and charges a fee of 75 basis points a year. From a sector look, the fund has high exposure to Information Technology, Industrials and Consumer Discretionary with 51%, 21.2% and 20.8% allocation, respectively (as of March 31, 2017). The fund has an 11.6% exposure to Tesla Inc. It has returned 27.62% year to date and 45.38% in the last one year (as of July 5, 2017).


VanEck Vectors Global Alternative Energy ETF GEX


This fund offers exposure to various alternative energy industries and is appropriate for investors who are bullish on the thriving clean energy space.


It has AUM of $78.7 million and charges a fee of 62 basis points a year. From a geographical perspective, the fund has high exposure to United States, Denmark and Germany with 55.17%, 11.06% and 8.44% allocation, respectively (as of May 31, 2017). From a sector look, the fund has high exposure to Industrials, Information Technology and Consumer Discretionary with 51.5%, 22% and 12.8% allocation, respectively (as of May 31, 2017). The fund has a 12.81% exposure to Tesla Inc. It has returned 17.04% year to date and 23.24% in the last one year (as of July 5, 2017) (read: 4 ETF & Stock Charts to Tap Revenue Growth).


First Trust NASDAQ Clean Edge Green Energy Index Fund QCLN


This fund offers exposure to various alternative energy industries and is appropriate for investors who are seeking exposure to green energy sub sectors.


It has AUM of $70.12 million and charges a fee of 60 basis points a year. From a sector look, the fund has high exposure to Industrials, Information Technology and Oil and Gas with 31.04%, 25.62% and 19.08% allocation, respectively (as of July 3, 2017). The fund has an 8.01% exposure to Tesla Inc. It has returned 16.06% year to date and 26.7% in the last one year (as of July 5, 2017).


Bottom Line


Though Tesla has delivered a solid performance so far this year, the uncertainty around the production targets makes us believe that it is best to remain on the sidelines for now.


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Tesla Inc. (TSLA): Free Stock Analysis Report
 
NASDAQ-CL EDG G (QCLN): ETF Research Reports
 
VANECK-GLBL AE (GEX): ETF Research Reports
 
ARK-INDUS INNOV (ARKQ): ETF Research Reports
 
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