It’s not unusual for Tesla (NASDAQ: TSLA) to pack good news into a condensed time frame. That’s the case again this week, and it’s benefiting exchange traded funds such as the ARK Autonomous Technology & Robotics ETF (CBOE: ARKQ).
Of the three ARK Investment Management ETFs with Tesla exposure, ARKQ features the largest weight to the electric vehicle maker. That’s relevant at a time when Morgan Stanley’s Adam Jonas, one of the most widely followed Tesla analysts, is growing bullish on the name. On Wednesday, Jonas raised his price target on Tesla to $540 from $360.
“Tesla is on the verge of a profound model shift from selling cars to generating high margin, recurring software and services revenue,” he said in a note to clients.
ARKQ captures the converging industrial and technology sectors, capitalizing from autonomous vehicles, robotics, 3D printing, and energy storage technologies. That wide mandate helps lever the ARK fund much more than just self-driving cars, an important trait in an age of rapid robotics advancements.
The ARKQ: An Impressive Tesla Tale
Currently, electric vehicles represent a small percentage of new automobiles sold around the world, but that percentage is expected to increase in a big way over the next several years. Increasing battery life and power is essential to converting more drivers to electric vehicles. That speaks to the long-term efficacy of the ARKQ thesis.
“Tesla has continued to develop its services/platform business to a level where we feel that it is appropriate for investors to consider to change how they model the company’s revenue and profit streams,” notes Jonas.
ARKQ’s industrial exposure covers a so-called new industrial revolution or advances in autonomous vehicles, robotics, 3D printing, and energy storage technology that are enhancing productivity, reducing costs, and transforming the manufacturing landscape. The fund allocates approximately 10% of its weight to Tesla stock.
“To only value Tesla on car sales alone ignores the multiple businesses embedded within the company, and ignores the long term value creation arising from monetizing Tesla’s core strengths, driven by best in class software and ancillary services,” concludes Jonas.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
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