ETFs in Focus Ahead of Tesla Q3 Earnings

Electric carmaker Tesla Motors TSLA is scheduled to report third-quarter 2022 results on Oct 19 after market close. Let’s take a closer look at its fundamentals ahead of the earnings release.

Tesla has shed about 9% over the past three months but outperformed the industry’s average loss of 15%. The outperformance is expected to continue if the carmaker beats on earnings estimate.

This has put the ETFs having a substantial allocation to this luxury carmaker like Consumer Discretionary Select Sector SPDR Fund XLY, Vanguard Consumer Discretionary ETF VCR, Fidelity MSCI Consumer Discretionary Index ETF FDIS, Simplify Volt Robocar Disruption and Tech ETF VCAR and MicroSectors FANG+ ETN FNGS in focus ahead of Q3 earnings.

Earnings Whispers

Tesla has a Zacks Rank #3 (Hold) and an Earnings ESP of -0.04%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 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 earnings track is robust for the company, which delivered a four-quarter average earnings surprise of 32.2%. Additionally, the Zacks Consensus Estimate for the first quarter indicates substantial year-over-year growth of 53.2% for earnings and 61.9% for revenues (see: all the Alternative Energy ETFs here).

Tesla has a top Growth Score of A and belongs to a bottom-ranked Zacks industry (in the bottom 47%). The Zacks Consensus Estimate for the average target price is $30.6.84, 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. The stock has a P/E ratio of 51.17 versus the industry average of 10.04.

Strong Q3 Production

Earlier this month, Tesla reported record deliveries for the third quarter, signaling another strong earnings report later this month.

The company delivered 343,830 (325,158 Model 3 and Y, and 18,672 Model S and X) cars worldwide in the third quarter. This is up 42% from the year-ago quarter and 35% from the prior quarter. It also topped the first-quarter record of 310,048. However, the number is well below analysts’ expectation of 350,000-370,000 deliveries, suggesting supply chain snarls. The Shanghai plant faced a lengthy shutdown and slow recovery in the second quarter due to COVID lockdowns (read: Tesla Hits Record Q3 Vehicles, Misses View: ETFs in Focus).

The electric carmaker produced 365,923 (345,988 Model 3 and Y, and 19,935 Model S and X) vehicles during the quarter.

ETFs to Watch

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: Here's Why to Buy Top-Ranked Consumer Discretionary ETFs).

Consumer Discretionary Select Sector SPDR Fund is the largest and most popular product in this space, with AUM of $14 billion and an average daily volume of around 5.6 million shares. Holding 56 securities in its basket, Tesla takes the second spot with 17.7% of assets. Consumer Discretionary Select Sector SPDR Fund charges 10 bps in annual fees and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

Vanguard Consumer Discretionary ETF (VCR)

Vanguard Consumer Discretionary ETF currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index and holds 311 stocks in its basket. Of these, Tesla occupies the second position with a 16.4% allocation. Internet & direct marketing retail takes the largest share at 23.9%, while automobile manufacturers, home improvement retail and restaurants round off the next three spots (read: 5 Favorite Sectors of Q3 Earnings and Their ETFs).

Vanguard Consumer Discretionary ETF charges investors 10 bps in annual fees while volume is moderate at nearly 90,000 shares a day. The product has managed about $4.1 billion in its asset base and carries a Zacks ETF Rank #1 with a Medium risk outlook.

Fidelity MSCI Consumer Discretionary Index ETF (FDIS)

Fidelity MSCI Consumer Discretionary Index ETF tracks the MSCI USA IMI Consumer Discretionary Index, holding 330 stocks in its basket. Of these, TSLA takes the second spot with a 16.5% share.

Fidelity MSCI Consumer Discretionary Index ETF has amassed $1 billion in its asset base while trading in a good volume of around 70,000 shares a day on average. Fidelity MSCI Consumer Discretionary Index ETF charges 8 bps in annual fees from investors and has a Zacks ETF Rank #1 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 $3.3 million in its asset base while trading in an average daily volume of 1,000 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.

MicroSectors FANG+ ETN has accumulated $47.5 million in its asset base and charges 58 bps in annual fees. It trades in an average daily volume of 19,000 shares and has a Zacks ETF Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.