Tesla ETFs Soar on Musk’s Futuristic Vision

TSLL jumped as much as 28% on Wednesday.

sumit
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Senior ETF Analyst
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Reviewed by: etf.com Staff
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Edited by: James Rubin

Amazing words, horrible numbers. That’s the way a lot of people characterized Tesla’s latest earnings report and conference call.

On Wednesday, the words won out as investors sent shares of the world’s largest electric vehicle maker up by 14%, its biggest gain since 2021.

That, in turn, sent the $750 million Direxion Daily TSLA Bull 2X Shares (TSLL) higher by a whopping 28%.

Even the $19 billion Consumer Discretionary Select Sector SPDR Fund (XLY) gained 1.4%, an outperformance versus the flat S&P 500. The ETF holds over 11% of its portfolio in Tesla stock.

Notably Lower Growth  

Tesla’s earnings report confirmed everything investors feared about the company’s financials in the first quarter.

Adjusted earnings per share came in at $0.45, a decline of 47% compared to the year ago period. Revenues of $21.3 billion fell by 8.7%. And the company burned $2.5 billion of cash in the quarter.  

These financial metrics are unlikely to improve imminently, according to the firm.

“In 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023,” the company wrote in its Q1 shareholder update.

But investors didn’t care. The slowdown in Tesla’s growth this year was already well known to investors; it’s the reason the stock plunged 42% from the start of the year through Tuesday.  

A Futuristic Vision  

Instead, investors focused on Tesla’s cost-cutting measures, which have included layoffs of 2,700 employees at its Gigafactory in Austin, Texas, and the highly optimistic, futuristic vision for Tesla that CEO Elon Musk described in his conference call remarks.

Musk promised that the company would soon operate millions of autonomous vehicles, which he called “Cybercabs.” It would also begin selling its humanoid robot, Optimus, as soon as 2025.

Musk has a history of making bold promises that take much longer to come to fruition than he initially predicts. But he also has a reputation of delivering on many of his promises eventually.

It wasn’t just robots and autonomous cars that made Tesla investors so happy on Wednesday. The company said that it would “accelerate the launch of new vehicle models ahead of our previously communicated start of production in the second half of 2025.”

“These new vehicles, including more affordable models, will utilize aspects of the next generation platform as well as aspects of our current platforms, and will be able to be produced on the same manufacturing lines as our current vehicle line-up,” the company said.  

That assuaged some investors’ concerns that Tesla’s vehicle line-up was getting stale, while opening the possibility that growth could reaccelerate next year.

Earlier this month, Reuters reported that Tesla was abandoning its plans to build a cheap, mass market car dubbed the Model 2.

While Tesla didn’t say whether any of its new models would be comparable to the Model 2, the fact that the company was bringing new vehicles to the market was enough to excite investors.  

Competing Narratives

Still, not everyone is convinced by Tesla’s rosy words.

Analysts at Bernstein said that they “struggle with why Tesla needs a discrete robo-taxi offering.” They added that they believe widespread deployment of Tesla’s Cybercab “is 5 to 10 years away” and that autonomous vehicles “will not necessarily be a winner take all market.” 

Bank of America analysts took the other side.  

Tesla addressed “key concerns heading into the quarter and revitalized the growth narrative” they said. “In the near-term, the tide in news flow appears to suggest the risk to the stock is skewing more positively.” 

Tesla stock remains very much a battleground for competing narratives, and at least today, the bulls are winning out.  

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.