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ETF News And Commentary

The online e-commerce behemoth Amazon (AMZN - Analyst Report) reported impressive Q1 results after the market closed yesterday. The company beat our estimates on both the top and the bottom line, cheering investors’ mood.

Earnings per share came in at 23 cents, a penny ahead of the Zacks Consensus Estimate and 28% higher than the year-ago earnings. Revenues climbed 23% year over year to $19.74 billion, surpassing the Zacks Consensus Estimate of $19.48 billion (read: Technology ETFs: Pain or Gain Ahead?).

Robust performances were credited to new products, cloud computing offerings and overseas expansion. Additionally, the company’s video strategy is paying off as video streaming on Prime Instant Video nearly tripled year over year. Further, the successful launch of Fire TV, a subsequent content deal made with HBO, is gaining increased traction from many new partners, including Netflix (NFLX), HBO Go, Hulu Plus, Crackle and Showtime Anytime.

For the current quarter, the company projects revenue to grow 15-26% to $18.1 billion to $19.8 billion. The midpoint is above our current estimate of $19.12 billion, suggesting optimism in the AMZN growth story. It also expects an operating loss between $55 million and $455 million in the second quarter compared with operating income of $79 million last year.

Following the earnings announcement, the shares of AMZN rose as much as 2% in after hour trading on Thursday but are just up 0.25% at the close.

ETF Angle

Both the earnings and revenue beat puts some ETFs having higher allocation to this Internet giant in focus for the coming days. Investors should closely monitor the movement of these funds and take opportunity of any surge in AMZN price (see: all the Technology ETFs here).

This is especially true given that AMZN currently has a Zacks Rank #2 (Buy), which adds to its bullish outlook and suggests good trading ahead.

Market Vectors Retail ETF ((RTH - ETF report))

This fund provides exposure to the 26 largest retail firms by tracking the Market Vectors U.S. Listed Retail 25 Index. Of these, AMZN takes the second spot at 9.78%. The ETF has a certain tilt toward growth stocks, accounting for more than half of the portfolio, while sector wise, specialty retail has nearly one-third of the share (read: Is It Finally Time to Buy Retail ETFs?).

The product has amassed $24.7 million in its asset base and charges 35 bps in annual fees. Volume is moderate as it exchanges nearly 41,000 shares per day. RTH is down over 3% in the year-to-date time frame and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a ‘Medium’ risk outlook.

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 about 100 stocks in its basket with AUM of $326.3 million while charging 60 bps in fees per year. It trades in moderate volumes of more than 84,000 shares a day.

Amazon occupies the third position with a 8.13% allocation. In terms of industrial exposure, Internet software and services makes up for more than two-thirds of the share in the basket, followed by Internet retail. PNQI lost nearly 4.5% so far this year and currently has a Zacks Rank of 2 or ‘Buy’ rating with a ‘High’ risk outlook.

First Trust Dow Jones Internet Index ((FDN - ETF report))

This is one of the most popular and liquid ETFs in the broad tech space with AUM of over $1.9 billion and average daily volume of more than 486,000 shares. The fund tracks the Dow Jones Internet Composite Index and charges 57 bps in fees per year (read: Guide to Internet ETFs).

In total, the fund holds 42 stocks in its basket with Amazon taking the top spot with a 7.16% share. From a sector look, Internet mobile applications accounts for more than half of the portfolio while Internet retail make up for 23%. The ETF is down about 3% year to date and has a Zacks Rank of 2 or ‘Buy’ rating with a ‘High’ risk outlook.

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