The social media giant Facebook (FB - Analyst Report) once again reported robust results for Q1 on continued strength in mobile advertising business. The company surpassed our estimates on both top and bottom lines for the fourth consecutive quarter, lending optimism to its future growth story.
Earnings per share nearly tripled to 25 cents and strongly outpaced the Zacks Consensus Estimate of 18 cents. Revenues climbed 72% year over year to $2.50 billion and surpassed our estimate of $2.36 billion (see: all the Technology ETFs here).
Robust performance was driven by an 82% year-over-year increase in advertising revenues, the strongest rate in three years. Mobile advertising revenues accounted for 59% of net advertising revenue, up from 53% in prior quarter and 30% in the year-ago quarter. The company saw remarkable growth in both daily (21% to 802 million) and monthly active users (15% to 1.28 billion) in the reported quarter.
The announcement that Facebook CFO David Ebersman would be stepping down later this year after serving for more than five years, had no effect on its earnings. And the shares of FB increased nearly 5% in after-market hours trading, suggesting solid trading in the coming days and bullishness in its future growth.
This is particularly true as the company continues to gain market share in the global digital advertising market, in particular mobile advertisement segment, which is a key growth catalyst. Facebook is expected to steal some share from Google (GOOG) this year and capture 22% of global mobile digital ad sales, up from 18% last year, as per eMarketer. Meanwhile, Google market share in the global mobile digital ad will likely decline to 47% from 49%.
Further, Facebook has been on the acquisition spree this year, which would fuel the growth over the long term. The company plans to acquire the mobile-messaging startup WhatsApp for $19 billion and virtual-reality headset maker Oculus VR for $2 billion. Both the deals are pending regulatory approvals (read: Facebook to Buy WhatsApp, 3 ETFs to Watch).
Moreover, Facebook currently has a Zacks Rank #2 (Buy) and a solid Zacks Industry Rank in the top 38%, suggesting that the bullish trend will definitely continue in the near future.
ETFs to Watch
Based on impressive results and solid growth prospects, investors could definitely focus on ETFs that have a larger allocation to this networking giant and grab any opportunity from a surge in the FB price. For those investors, we have highlighted three ETFs that are poised to move upward following FB Q1 results:
Global X Social Media Index ETF ((SOCL - ETF report))
This ETF offers the only pure play in the social media space and amassed $134.9 million in its asset base. The ETF charges 0.65% in fees and expenses and sees good volumes of roughly 229,000 shares a day (read: Sell-Off in Social Media Stocks Puts SOCL ETF in Trouble).
The product tracks the Solactive Social Media Index, holding 28 securities in the basket. Of these firms, Facebook takes the second spot, making up roughly 12.97% of assets. In terms of country exposure, U.S. firms take more than half the portfolio, closely followed by China (26%) and Japan (8%).
The ETF has lost over 10% year-to-date but currently has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook.
First Trust US IPO Index Fund ((FPX - ETF report))
This ETF provides exposure to the booming U.S. IPO market by tracking the IPOX-100 U.S. Index. The fund has accumulated $480 million in AUM and charges 60 bps in fees a year. Volume is good as it exchanges nearly 150,000 shares in hand on average (read: Profit from the Booming IPO market with these ETFs).
In total, the fund holds 100 securities in its basket with FB at the top with 9.22% allocation. The product is slight tilted toward consumer discretionary at 27.4% while information technology, energy and healthcare round off the next three spots. FPX has added over 1.5% so far this year.
PowerShares Nasdaq Internet Portfolio ((PNQI - ETF report))
This fund follows the Nasdaq Internet Index, giving investors exposure to the broad Internet industry. The fund holds 100 stocks in its basket with AUM of $326.3 million while charging 60 bps in fees per year. The ETF trades in moderate volume of nearly 84,000 shares a day.
Facebook occupies the fourth position in the basket with 8.12% of assets. In terms of industry exposure, Internet software & services makes up for more than two-third share in the basket, followed by Internet retail (30.6%). PNQI is down nearly 4.5% year-to-date and has a Zacks ETF Rank of 2 or ‘Buy’ with a High risk outlook.
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