Tesla Has More Avenues For Disruption, And That's Potent For This Disruptive ETF

Tesla TSLA is one of the gold standards when it comes to disruptive companies, but its ability to alter industries may not be confined to electric vehicles and clean energy.

What Happened: As has been widely noted over the course of Tesla's stunning year — one that's seen the shares climb 580% — the stock is affecting myriad exchange traded funds in positive ways. One of those funds is the ARK Autonomous Technology & Robotics ETF ARKQ.

Actively managed ARKQ merits a place in the Tesla ETF conversation because it allocates 11.67% of its weight to the stock, one of the largest such allocations among all ETFs.

Companies in ARKQ “are focused on and are expected to substantially benefit from the development of new products or services, technological improvements and advancements in scientific research related to, among other things, energy, automation and manufacturing, materials, and transportation,” according to ARK Investment Management.

Why It's Important: Up 86% this year, ARKQ highlights the benefits of an ETF with large Tesla exposure, but there's more to the story. The fund is ideally positioned to capitalize on long-term disruption by Elon Musk's company on a variety of fronts, including ride-hailing.

“ARK believes that a ride-hail network will enhance Tesla’s profitability prior to the launch of a robotaxi service,” said ARK analyst Tasha Keeney in note.

“Moreover, it seems that the launch of a robotaxi service would not tie up significant engineering resources except for routing, payment integration, and other functions that will be critical to the launch of robotaxis.”

Keeney's highlighting of the ride-hailing opportunity with Tesla came a day before Goldman Sachs upgraded the stock to a Buy, saying it can surge another 37% over the next year, thereby making the bank the biggest Tesla bull on Wall Street.

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What's Next: Though it may seem that way, ARKQ — one of three ARK ETFs with significant Tesla exposure — isn't Tesla-dependent.

The fund offers broad reach into other themes, such as 3D printing, clean energy and space exploration.

Yet there's no denying that Tesla has the potential to disrupt ride-hailing, and pursuing that objective jibes with the company's goal of converting the world to cleaner, smarter energy.

“Pursuing a vertically integrated ride-hail service, Tesla could unlock the benefits of a robotaxi-like financial model and at the same time lower considerably the technical risk of launching a robotaxi network,” said Keeney.

“For the first 3 million cars sold into the ride-hail channel, ARK believes that Tesla would generate net profits per mile close to that of an autonomous robotaxi service.”

Photo courtesy of Tesla.