Tesla's 'Battery Day': Pain or Gain for ETFs Over Long Term?

Electric carmaker Tesla’s TSLA “Battery Day” event, held on Sep 22, was a much-anticipated event. Many investors had high hopes from the event but the stock sold off about 5% in before market sessions on Sep 23.This was because Chief Executive Elon Musk said that some of the innovations showcased at the event were “close to working” and will “not reach serious high-volume production until 2022.”

Tesla shares have staged a monstrous rally this year. Despite the latest selloffs, shares are up 407.1% this year. However, Tesla shares have gained only 3.5% past month as the stock plunged 21% on Sep 8, marking its biggest daily percentage drop. This happened because the electric carmaker was excluded from the group of companies that are being added to the S&P 500 (read: What Lies Ahead of Tesla ETFs as It Fails to Make It to S&P 500?).

What Lies Ahead of Tesla?

Tesla unveiled plans to develop dramatically long-lasting “million miles” battery. Though the announcement was short of details, it marks a 54% increase in range, according to the company

The company also shared plans to further reduce the already-low cost of its battery cells and packs to $100 per kilowatt-hour, at which point price equivalence of electric cars should become similar to combustion engine vehicles, per experts.

Musk said Tesla would boost battery cell purchases from suppliers Panasonic, LG and CATL but cautioned about “significant shortages in 2022 & beyond," as quoted on a CNBC article. On a positive note, Musk predicted the company is likely to develop a $25,000 full self-driving car within three years.

Musk expects vehicle deliveries to rise by 30% to 40% year over year. The new guidance indicates deliveries of between 477,750 and 514,500 cars, a range that includes the company’s previously stated target of delivering half a million cars in 2020, per a CNBC article.

Meanwhile, “sources told Reuters recently that Tesla is planning to export Model 3 vehicles made in China to the Asian and European markets. The automaker is expanding its manufacturing base in China to make Model Y sports-utility vehicles and adding lines to make more battery packs, electric motors and motor controllers,” as quoted on a source.

Should You Bet on Tesla on Long-Term Prospects?

The Zacks Consensus Estimate for the short-term price target is $295.38 with 20 analysts offering the price target. This implies a 30.4% decline from the current price of $424.23 per share as of Sep 22.

Notably, the highest short-term price target is $550 while the lowest short-term price target is $65. Of the 20 analysts covering the stock, 12 provided a “Hold” rating, followed by a “Strong Sell” from four and “Strong Buy” from four.

This indicates more selling pressure in Tesla shares in the coming days. So, investors who have already missed the rally in Tesla shares this year, can wait for some more time and then buy the stock to capitalize on the long-term prospects.

The stock currently has a Zacks Rank #3 (Hold). Investors intending to tap the long-term potential in the stock may also play the following ETFs as the basket approach is less risky.

ETFs in Focus

MicroSectors FANG+ ETN FNGS — Tesla accounts for about 10% share.

ARK Web x.0 ETF ARKW —Tesla occupies the top position at 9.7%.

ARK Autonomous Technology & Robotics ETF ARKQ — Tesla occupies the top spot with 9.4% share. 

First Trust NASDAQ Global Auto ETF CARZ — The fund invests about 10% weight in Tesla.

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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.

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