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After the closing bell on Thursday, online e-commerce behemoth Amazon (AMZN - Free Report) reported robust Q2 earnings result with a massive earnings beat of 103.61% and the biggest quarterly profit of $2.5 billion in its history powered by the fast-growing cloud computing business and surprise strength in in online sales.
Earnings per share came in at $5.07, more than double the Zacks Consensus Estimate of $2.49 and up a wide margin the year-ago earnings of 40 cents. Revenues climbed 39% year over year to $52.9 billion but fell short of the estimate of $53.4 billion. In particular, revenues from the cloud computing business — Amazon Web Services (AWS) — surged 49% year over year to $6.1 billion (read: Amazon Tops $900B on Record Prime Day Sales: ETFs to Tap).
For the third quarter of 2018, the company expects revenues to grow 23-31% to $54-$57.5 billion. The Zacks Consensus Estimate is pegged at $58.24 billion, which represents 33.14% growth. Operating income is expected in the range of $1.4-$2.4 billion. Amazon currently has a Zacks Rank #3 (Hold) and a VGM Score of F.
Market Impact
The big earnings beat pushed shares of AMZN higher as much as more than 5% in aftermarket hours to new record highs. This has eased investors’ concern in the technology sector, which was hammered by Facebook’s disappointing second-quarter report (read: Facebook Shares Tank on Awful Q2 & Outlook: ETFs to Watch).
Solid trading in the stock will definitely continue in the ETF world, especially for funds with the highest allocation to this Internet giant. Below we have highlighted some that would be in focus in the coming days and could see an upside post AMZN results.
Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)
This product offers exposure to the broad consumer discretionary space by tracking the Consumer Discretionary Select Sector Index. It is the largest and most-popular product in this space, with AUM of nearly $14 billion and average daily volume of around 6.2 million shares. Holding 80 securities in its basket, Amazon takes the top spot with 24.5% of assets. Internet & direct marketing retail dominates about one-third of the portfolio, while specialty retail, media, and hotels restaurants and leisure round off the next three spots, with a double-digit allocation each. The fund charges 0.13% in expense ratio and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
This has newly debuted in the space and is the first ETF focused exclusively on retailers that principally sell online. It follows the ProShares Online Retail Index, holding 21 stocks in its basket. Amazon is the top firm accounting for about 24.2% of the portfolio. The product has amassed $4.1 million in its asset base within two weeks of its debut, while currently trades in a paltry volume of around 16,000 shares a day on average. It charges 58 bps in annual fees from investors.
This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Transition Index and holds 372 stocks in its basket. Of these, Amazon occupies the top position at 21.3% allocation. Internet & direct marketing retail takes the largest share at 27.9%, while other industries make up for a nice mix with a single-digit allocation. VCR charges investors 10 bps in annual fees, while volume is moderate at nearly 95,000 shares a day. The product has managed about $3 billion in its asset base and has a Zacks ETF Rank #3 (Hold), with a Medium risk outlook (read: How GICS Changes Will Impact Hottest Stocks and ETFs).
This ETF provides targeted exposure to domestic consumer services’ stocks by tracking the Dow Jones U.S. Consumer Services Index. It holds 160 stocks in its basket, with Amazon being the top firm holding 21.3% share. In terms of industrial exposure, retailing makes up the largest share with 49.7, followed by media (18.3%), and consumer services (16.1%). The fund has amassed $890.9 million in its asset base, while trades in lower volumes of 31,000 shares a day on average. It charges 44 bps in annual fees from investors and has a Zacks ETF Rank #2 with a Medium risk outlook.
This fund provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index. Of these, AMZN takes the top position in the basket with 20.04% share. The ETF has a certain tilt toward specialty retail, which accounts for 31.4% of the portfolio, while food & staples retailing (24.3%) and Internet & direct marketing retail (23.9) round off the next two spots. The product has amassed $96.3 million in its asset base and charges 35 bps in annual fees. Volume is light as it exchanges nearly 12,000 shares per day. RTH has a Zacks ETF Rank #3 with a Medium risk outlook.
Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report)
This fund tracks the MSCI USA IMI Consumer Discretionary Index, holding 342 stocks in its basket. Of these, AMZN takes the top spot with 20.2% share. Internet & direct marketing retail makes up for the top sector with 28.3% share followed by specialty retail (17.2%), media (16.7%) and hotels, restaurants & leisure (14.9%). The product has amassed $650.8 million in its asset base, while trades in a good volume of around 133,000 shares a day on average. It charges 8 bps in annual fees from investors and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Top-Ranked Sector ETFs to Buy for Q3).
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ETFs to Ride High on Amazon's Soaring Q2 Profit
After the closing bell on Thursday, online e-commerce behemoth Amazon (AMZN - Free Report) reported robust Q2 earnings result with a massive earnings beat of 103.61% and the biggest quarterly profit of $2.5 billion in its history powered by the fast-growing cloud computing business and surprise strength in in online sales.
Earnings per share came in at $5.07, more than double the Zacks Consensus Estimate of $2.49 and up a wide margin the year-ago earnings of 40 cents. Revenues climbed 39% year over year to $52.9 billion but fell short of the estimate of $53.4 billion. In particular, revenues from the cloud computing business — Amazon Web Services (AWS) — surged 49% year over year to $6.1 billion (read: Amazon Tops $900B on Record Prime Day Sales: ETFs to Tap).
For the third quarter of 2018, the company expects revenues to grow 23-31% to $54-$57.5 billion. The Zacks Consensus Estimate is pegged at $58.24 billion, which represents 33.14% growth. Operating income is expected in the range of $1.4-$2.4 billion. Amazon currently has a Zacks Rank #3 (Hold) and a VGM Score of F.
Market Impact
The big earnings beat pushed shares of AMZN higher as much as more than 5% in aftermarket hours to new record highs. This has eased investors’ concern in the technology sector, which was hammered by Facebook’s disappointing second-quarter report (read: Facebook Shares Tank on Awful Q2 & Outlook: ETFs to Watch).
Solid trading in the stock will definitely continue in the ETF world, especially for funds with the highest allocation to this Internet giant. Below we have highlighted some that would be in focus in the coming days and could see an upside post AMZN results.
Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report)
This product offers exposure to the broad consumer discretionary space by tracking the Consumer Discretionary Select Sector Index. It is the largest and most-popular product in this space, with AUM of nearly $14 billion and average daily volume of around 6.2 million shares. Holding 80 securities in its basket, Amazon takes the top spot with 24.5% of assets. Internet & direct marketing retail dominates about one-third of the portfolio, while specialty retail, media, and hotels restaurants and leisure round off the next three spots, with a double-digit allocation each. The fund charges 0.13% in expense ratio and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
ProShares Online Retail ETF (ONLN - Free Report)
This has newly debuted in the space and is the first ETF focused exclusively on retailers that principally sell online. It follows the ProShares Online Retail Index, holding 21 stocks in its basket. Amazon is the top firm accounting for about 24.2% of the portfolio. The product has amassed $4.1 million in its asset base within two weeks of its debut, while currently trades in a paltry volume of around 16,000 shares a day on average. It charges 58 bps in annual fees from investors.
Vanguard Consumer Discretionary ETF (VCR - Free Report)
This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Transition Index and holds 372 stocks in its basket. Of these, Amazon occupies the top position at 21.3% allocation. Internet & direct marketing retail takes the largest share at 27.9%, while other industries make up for a nice mix with a single-digit allocation. VCR charges investors 10 bps in annual fees, while volume is moderate at nearly 95,000 shares a day. The product has managed about $3 billion in its asset base and has a Zacks ETF Rank #3 (Hold), with a Medium risk outlook (read: How GICS Changes Will Impact Hottest Stocks and ETFs).
iShares U.S. Consumer Services ETF (IYC - Free Report)
This ETF provides targeted exposure to domestic consumer services’ stocks by tracking the Dow Jones U.S. Consumer Services Index. It holds 160 stocks in its basket, with Amazon being the top firm holding 21.3% share. In terms of industrial exposure, retailing makes up the largest share with 49.7, followed by media (18.3%), and consumer services (16.1%). The fund has amassed $890.9 million in its asset base, while trades in lower volumes of 31,000 shares a day on average. It charges 44 bps in annual fees from investors and has a Zacks ETF Rank #2 with a Medium risk outlook.
VanEck Vectors Retail ETF (RTH - Free Report)
This fund provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index. Of these, AMZN takes the top position in the basket with 20.04% share. The ETF has a certain tilt toward specialty retail, which accounts for 31.4% of the portfolio, while food & staples retailing (24.3%) and Internet & direct marketing retail (23.9) round off the next two spots. The product has amassed $96.3 million in its asset base and charges 35 bps in annual fees. Volume is light as it exchanges nearly 12,000 shares per day. RTH has a Zacks ETF Rank #3 with a Medium risk outlook.
Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report)
This fund tracks the MSCI USA IMI Consumer Discretionary Index, holding 342 stocks in its basket. Of these, AMZN takes the top spot with 20.2% share. Internet & direct marketing retail makes up for the top sector with 28.3% share followed by specialty retail (17.2%), media (16.7%) and hotels, restaurants & leisure (14.9%). The product has amassed $650.8 million in its asset base, while trades in a good volume of around 133,000 shares a day on average. It charges 8 bps in annual fees from investors and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Top-Ranked Sector ETFs to Buy for Q3).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>