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ETFs in Focus Ahead of Tesla Q4 Earnings

Electric carmaker Tesla Motors TSLA is scheduled to report fourth-quarter 2022 results on Jan 25 after market close. Let’s take a closer look at its fundamentals ahead of the earnings release.

Tesla's stock tumbled 65% in 2022, its worst year since going public in 2010, and wiped out more than $700 billion in market cap due to weakening demand, supply-chain issues, and potential legal issues. Over the past three months, the stock shed about 32% compared to the industry’s average loss of 16%. The weak trend will reverse only if the carmaker beats on earnings estimate.

This has put the ETFs having a substantial allocation to this luxury carmaker like MeetKevin Pricing Power ETF PP, ARK Autonomous Technology & Robotics ETF ARKQ, Consumer Discretionary Select Sector SPDR Fund XLY, Simplify Volt Robocar Disruption and Tech ETF VCAR and MicroSectors FANG+ ETN FNGS in focus ahead of Q4 earnings.

Earnings Whispers

Tesla has a Zacks Rank #5 (Strong Sell) and an Earnings ESP of +3.06%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The electric carmaker saw negative earnings estimate revision of a couple of cents over the past seven days for the to-be-reported quarter. Analysts decreasing estimates right before earnings — with the most up-to-date information possible — is not a good indicator for the stock. The negative revision came as COVID outbreaks in China caused the company to temporarily suspend and reduce production at its Shanghai factory. Most probably, Tesla will likely have the weakest quarterly profit and slower revenue growth in three years.

However, the earnings track is robust for the company, which delivered a four-quarter average earnings surprise of 26.35%. Additionally, the Zacks Consensus Estimate for the fourth quarter indicates substantial year-over-year growth of 31.76% for earnings and 35.75% for revenues (see: all the Alternative Energy ETFs here).

Tesla has a top Growth Score of A but belongs to a bottom-ranked Zacks industry (in the bottom 14%). The Zacks Consensus Estimate for the average target price is $206.45, with nearly 54% of the analysts giving a Strong Buy or a Buy rating ahead of the company’s earnings.    

While Tesla is poised for robust growth, its valuation remains high even after the steep sell-off last year. The stock has a P/E ratio of 28.82 versus the industry average of 11.64.

Record Q4 Production But Misses View

Earlier this month, Tesla reported record deliveries for the fourth quarter but fell short of the analysts’ estimates due to logistics problems, slowing demand, rising interest rates and fears of recession. The miss has only added to the company’s pains of share price slide, surging inflation and an economic slowdown in China.

The company delivered 405,278 (388,131 Model 3 and Y, and 17,147 Model S and X) cars worldwide in the fourth quarter. This is up 31.5% from the year-ago quarter and 18.1% from the prior quarter. The electric carmaker produced 439,701 (419,088 Model 3 and Y, and 20,613 Model S and X) vehicles during the quarter.

For 2022, the electric carmaker delivered a record 1.31 million electric vehicles, up 40% from 2021. It has ramped up production after opening new factories in Texas, Shanghai and Berlin.

ETFs to Watch

MeetKevin Pricing Power ETF (PP)

MeetKevin Pricing Power ETF is an actively managed ETF that seeks to achieve its investment objective by investing primarily in the U.S.-listed equity securities of Innovative Companies that, in Kevin’s view, have more “pricing power” than their peers. The fund holds a small basket of 16 stocks, with Tesla occupying the top position at 27.7%.

MeetKevin Pricing Power ETF newly debuted in the space at the end of November and has accumulated $14.6 million in its asset base in a couple of months. It charges 77 bps in annual fees and trades in a lower volume of 45,000 shares a day on average.

ARK Autonomous Technology & Robotics ETF (ARKQ)

ARK Autonomous Technology & Robotics ETF 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 38 stocks, with Tesla occupying the top spot with a 10.9% share.

ARK Autonomous Technology & Robotics ETF has accumulated $838.9 million in its asset base and charges 75 bps in fees per year. It trades in a volume of 119,000 shares a day on average.

Consumer Discretionary Select Sector SPDR Fund (XLY)

Consumer Discretionary Select Sector SPDR Fund offers exposure to the broad consumer discretionary space by tracking the Consumer Discretionary Select Sector Index (read: 5 Top-Ranked ETFs to Buy at Bargain Prices for 2023).

Consumer Discretionary Select Sector SPDR Fund is the largest and most popular product in this space, with AUM of $13.4 billion and an average daily volume of around 4.4 million shares. Holding 56 securities in its basket, Tesla takes the second spot with 10.6% of assets. Consumer Discretionary Select Sector SPDR Fund charges 10 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Simplify Volt Robocar Disruption and Tech ETF (VCAR)

Simplify Volt Robocar Disruption and Tech ETF is an actively managed ETF seeking concentrated exposure to the leader of autonomous driving technology. It employs a call option overlay to seek boosts in performance during extreme moves up in Tesla while holding a tech index for diversification and put options as a hedge.

Simplify Volt Robocar Disruption and Tech ETF charges investors 0.95% in annual fees. It has accumulated $2.6 million in its asset base while trading in an average daily volume of 3,000 shares.

MicroSectors FANG+ ETN (FNGS)

MicroSectors FANG+ 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 a 10% share (read: ETFs to Click on Netflix's Blowout Q4 Subscriber Growth).

MicroSectors FANG+ ETN has accumulated $48.9 million in its asset base and charges 58 bps in annual fees. It trades in an average daily volume of 24,000 shares and has a Zacks ETF Rank #3 (Hold).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Tesla, Inc. (TSLA) : Free Stock Analysis Report

Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports

ARK Autonomous Technology & Robotics ETF (ARKQ): ETF Research Reports

The Meet Kevin Pricing Power ETF (PP): ETF Research Reports

MicroSectors FANG ETN (FNGS): ETF Research Reports

Simplify Volt Robocar Disruption and Tech ETF (VCAR): ETF Research Reports

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