Tesla Inc.‘s (NASDAQ:TSLA) lackluster Q2 results have landed a number of ETFs with high exposure to the EV titan squarely in the crosshairs. Markets reacted to the results, pushing Tesla down by up to 8% on Thursday.
- TSLA stock recovers some of its losses. See real-time price here.
Investors could be reevaluating the risk embedded in funds that hold Tesla as a core position:
Simplify Volt TSLA Revolution ETF (NYSE:TESL): A highly concentrated Tesla play that uses options to manage volatility. If Tesla sneezes, this ETF catches a cold.
Consumer Discretionary Select Sector SPDR Fund (XLY): With almost 16% of its assets in Tesla, this sector heavyweight is directly exposed to the stock’s swoons and surges.
Nightview Fund (NYSE:NITE): Tesla constitutes 14% of this actively managed fund that bets on high-conviction, high-volatility stocks. The fund also dipped on Thursday in response to Tesla’s Wednesday after-market earnings.
Fidelity MSCI Consumer Discretionary Index ETF (FDIS): Has 14.5% in Tesla, reflecting the sector’s heavy dependence on Musk’s mojo. The fund reacted to the earnings result with a 1.3% dip at Thursday’s market open. The other stocks in the portfolio couldn’t help the fund from slipping.
Vanguard Consumer Discretionary ETF (NYSE:VCR): Tesla is 14.5% of this widely diversified consumer ETF, which is a significant risk factor. The fund opened 1.3% in the red in response to Tesla’s results, a meaningful slump for an ETF with other strong stocks in its portfolio as well.
For traders in these ETFs, Tesla’s most recent quarter wasn’t a speed bump, it was a pothole the size of a Cybertruck.
The Backstory: A Rough Quarter For Tesla
Tesla reported adjusted earnings of 33 cents a share, below forecasts of 39 cents, and revenue decreased 12% YoY to $22.5 billion, its steepest decline in more than a decade. Auto revenue dropped 16%, an agonizing 13.5% year-over-year decline in deliveries globally.
The company’s Model 3/Y cars did most of the heavy work, but it wasn’t enough to keep it out of worst delivery performance in its history. This is the second consecutive quarter of falling deliveries, a red flag even for the most die-hard bulls.
Can Musk’s Moonshots Rescue Tesla?
While sales are lagging, Musk is putting the pedal to the metal on the sci-fi story. Tesla rolled out its paid robotaxi service in Austin and is expanding across U.S. cities. Musk stated that the target is to reach “half the U.S. population” by the end of the year, pending regulators not putting the brakes on.
Tesla’s Q2 earnings miss isn’t merely a company tale, it’s an ETF tale. Portfolios such as XLY, VCR, and TESL, which are heavily concentrated in TSLA, are now along for the ride on a very volatile vehicle. While Musk’s robotaxi launches and Optimus aspirations provide some hope in the long term, near-term uncertainty is driving sentiment.
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