Editor's note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.
Investing in the funds involves a high degree of risk. Unlike traditional ETFs, or even other leveraged and/or inverse ETFs, these leveraged and/or inverse single-stock ETFs track the price of a single stock rather than an index, eliminating the benefits of diversification. Leveraged and inverse ETFs pursue daily leveraged investment objectives, which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying stock’s performance over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments. The Funds will lose money if the underlying stock’s performance is flat, and it is possible that the Bull Fund will lose money even if the underlying stock’s performance increases, and the Bear Fund will lose money even if the underlying stock’s performance decreases, over a period longer than a single day. Investing in the Funds is not equivalent to investing directly in TSLA.
Compared to its peers in the Magnificent Seven (Apple, Alphabet, Amazon, Meta, Microsoft, NVIDIA and Tesla), shares of Tesla, Inc. (Ticker: TSLA) have struggled to gain traction on the upside since the all-time high in November 2021. There have been concerns on the consumer front, as well as the decline in their vehicle prices, but will the recent Fed rate cut be enough to lead to a rebound in this stock?
Is Tesla Just a Car Maker?
One of the fundamental reasons Tesla’s stock has struggled over the past couple of years is plummeting vehicle prices and margin compression. But many analysts have argued that one of Tesla’s value propositions lies in its technology beyond just electrical vehicles (EVs).
For example, the company has a notable energy storage business segment for EV chargers and is a global leader in robotics technology. The energy generation and storage segment of its business accounted for over $3 billion in revenue in the second quarter, which more than doubled from the previous year.
Traders that think the company’s technological diversity could drive a comeback in its stock performance may find a trade with Direxion’s Daily TSLA Bull 2X Shares (Ticker: TSLL), which seeks daily investment results, before fees and expenses, of 200% of the performance of the common shares of Tesla, Inc. (Ticker: TSLL).
Below is a daily chart of TSLA as of September 12, 2024.
Source: TradingView.com
Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.
The performance data quoted represents past performance. Past performance does not guarantee future results.
The slanted blue lines represent an uptrend and/or downtrend. An uptrend describes the price movement of a financial asset when the overall direction is upward. A downtrend describes the price movement of a financial asset when the overall direction is downward.
Economic Slowdown & Earnings Issues
Although Tesla is at the forefront of next generation technology, we eventually need to see it translate into revenue and earnings growth in order for its bearish woes to evaporate. Tesla’s next earnings report is set to be released on October 16. Current estimates are for an earnings-per-share* of $0.46. If the company misses on its top and bottom lines, and issues negative guidance, it could lead to a continuation of its bear trend.
There are also broader economic concerns to contend with. If economic growth begins to slow and even enters a recession, it could present problems for the automotive manufacturer. This could lead to an uptick in layoffs and if consumers are out of work, it’s much harder to spend money, especially on vehicles.
The next report on the employment situation will be on October 4. If we see signs of labor market deterioration, it could spell further trouble for a name like Tesla.
In this scenario, Direxion’s Daily TSLA Bear 1X Shares (Ticker: TSLS), which seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of the common shares of Tesla, Inc. (Ticker: TSLA), could find a bid.
Additional Equity and Leveraged Sector Plays
Direxion also offers traders a way to make leveraged, sector-based plays, as well as offering additional individual equity plays aside from Tesla. These include stocks like Microsoft, Meta, Nvidia, Amazon, and more. Investing in the funds is not equivalent to investing directly in the underlying stocks.
Traders looking to trade the tech sector with leverage may be interested in Direxion’s Daily Technology Bull 3X Shares (Ticker: TECL) and Daily Technology Bear 3X Shares (Ticker: TECS). These funds seek daily investment results, before fees and expenses, of 300%, or 300% of the inverse (or opposite), of the performance of the Technology Select Sector Index*.
For electrical vehicle speculation, there’s even a Direxion Daily Electric and Autonomous Vehicle Bull 2X Shares (Ticker: EVAV). This fund seeks daily investment results, before fees and expenses, of 200% of the performance of the Indxx US Electric and Autonomous Vehicles Index*.
For other short-term, high-risk trades on the Magnificent 7, in either direction, here's a list of the Single Stock Daily Leveraged & Inverse ETFs.
The Direxion Daily AAPL Bull 2X Shares (Ticker: AAPU) seeks daily investment results, before fees and expenses, of 200% of the performance of Apple Inc. common stock, while the Direxion Daily AAPL Bear 1X Shares (Ticker: AAPD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of Apple Inc. common stock.
The Direxion Daily META Bull 2X Shares (Ticker: METU) seeks daily investment results, before fees and expenses, of 200% of the performance of Meta Platforms, Inc. common stock, while the Direxion Daily META Bear 1X Shares (Ticker: METD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of Meta Platforms, Inc. common stock.
The Direxion Daily MSFT Bull 2X Shares (Ticker: MSFU) seeks daily investment results, before fees and expenses, of 200% of the performance of Microsoft Corporation common stock, while the Direxion Daily MSFT Bear 1X Shares (Ticker: MSFD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of Microsoft Corporation common stock.
The Direxion Daily AMZN Bull 2X Shares (Ticker: AMZU) seeks daily investment results, before fees and expenses, of 200% of the performance of Amazon.com, Inc. common stock, while the Direxion Daily AMZN Bear 1X Shares (Ticker: AMZD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of Amazon.com, Inc. common stock.
*Definitions and Index Descriptions
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.
The Technology Select Sector Index (IXTTR) is provided by S&P Dow Jones Indices and includes domestic companies from the technology sector which includes the following industries: computers and peripherals; software; diversified telecommunications services; communications equipment; semiconductors and semi-conductor equipment; internet software and services; IT services; electronic equipment, instruments and components; wireless telecommunication services; and office electronics.
The Indxx US Electric and Autonomous Vehicles IndexIndex is designed to track the performance of electric and autonomous vehicles companies. The Index Provider defines electric and autonomous vehicles companies as those companies that derive at least 50% of their revenues from the following activities (or “sub-themes”): Manufacturers – companies that manufacture and sell electric or autonomous vehicles; Enablers – companies that build infrastructure or create technology for electric or autonomous vehicles, such as charging docks and batteries; and Software and Technology Services – companies that engage in the development of software and technology for electric or autonomous vehicles.
One cannot invest directly in an index.
The Fund has derived all disclosures contained in this document regarding Tesla, Inc. from publicly available documents. In connection with the offering of the Fund’s securities, neither the Fund, the Trust, nor the Adviser or any of its respective affiliates has participated in the preparation of such documents. Neither the Fund, the Trust nor the Adviser or any of its respective affiliates makes any representation that such publicly available documents or any other publicly available information regarding Tesla, Inc. is accurate or complete. Furthermore, the Fund cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price of Tesla, Inc. have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Tesla, Inc. could affect the value of the Fund’s investments with respect to Tesla, Inc.
Direxion Shares Risks – An investment in a Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund’s investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund’s other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning.
Leverage Risk – The Bull Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund’s correlation with TSLA and may increase the volatility of the Bull Fund.
Daily Correlation Risk – A number of factors may affect the Bull Fund’s ability to achieve a high degree of correlation with TSLA and therefore achieve its daily leveraged investment objective. The Bull Fund’s exposure to TSLA is impacted by TSLA’s movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to TSLA at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to TSLA increases on days when TSLA is volatile near the close of the trading day.
Daily Inverse Correlation Risk – A number of factors may affect the Bear Fund’s ability to achieve a high degree of inverse correlation with TSLA and therefore achieve its daily inverse investment objective. The Bear Fund’s exposure to TSLA is impacted by TSLA’s movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to TSLA at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to TSLA increases on days when TSLA is volatile near the close of the trading day.
Tesla Investing Risk — The trading price of TSLA has been highly volatile and could continue to be subject to wide fluctuations in response to various factors. The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.
Tesla, Inc. Investing Risk — Tesla, Inc. faces risks associated with future growth and success of consumers’ demand for electric vehicles; increasing competition; variability in the market for electric vehicles; potential delays in developing and launching new products; mismatches between supply and demand for the products; charging networks may be difficult to establish; product liability claims; cyberattacks; financial costs; system security and data breeches; as well as the risks related to the fact that communications from Mr. Musk to the public may significantly impact the trading price of TSLA.
Automotive Companies Risk — The automotive industry can be highly cyclical, and companies in the industry may suffer periodic operating losses. Automotive companies can be significantly affected by labor relations, fluctuating component prices and supplier disruptions.
Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Industry Concentration Risk, Market Risk, Indirect Investment Risk, and Cash Transaction Risk. Additionally, for the Direxion Daily TSLA Bear 1X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.
Distributor: ALPS Distributors, Inc.