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Facebook Jumps on Solid Q4 Results: ETFs Set to Surge
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After the closing bell on Wednesday, Facebook cheered Wall Street with robust fourth-quarter 2018 results, wherein it came up with huge revenue and earnings beat. This has reassured investors about the social media giant’s growth, allaying fears related to the company's privacy practice.
Q4 Results in Focus
Adjusted earnings per share came in at $2.38, crushing the Zacks Consensus Estimate of $2.17 and increasing 65% from year-ago earnings. Revenues soared 30.4% year over year to $16.91 billion and edged past the estimated $16.4 billion. However, it represents the slowest quarterly revenue growth in more than six years (read: FAANG ETFs in Focus Ahead of Q4 Earnings).
Notably, mobile advertising revenues accounted for 93% of total advertising revenues, up from 89% in the year-ago quarter. Both daily and monthly active users grew 9% year over year to 1.52 billion and 2.32 billion, respectively. The company estimates that more than 2.7 billion people use Facebook, WhatsApp, Instagram or Messenger ("Family" of services) each month, and more than 2 billion people use at least one of the Family of services every day on average.
The social media giant expects revenues to decelerate by mid single digits, excluding currency fluctuations, in the first quarter and continue to slow down throughout the year due to shifts in its advertising business. Facebook has been running more promotions in messaging apps and in user posts called "stories" that only last 24 hours, because the main Facebook news feed is so popular it has less room to grow. Those newer ads are less lucrative at the moment. The company also expects total expenses to rise 40-50% for the full year.
Market Impact
Following the results, shares of FB jumped more than 12% to its highest level since last August in aftermarket hours on elevated volume. Currently, Facebook has a Zacks Rank #3 (Hold) and a solid Growth Score of B. It further belongs to a top-ranked Zacks industry (top 40%).
ETFs to Watch
Given this, ETFs having a larger allocation to the networking giant are poised to surge post Facebook results. We have highlighted six of them in detail below:
Communication Services Select Sector SPDR (XLC)
This ETF offers exposure to the communication services sector of the S&P 500 index and has accumulated $3.9 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Facebook occupying the top position holding 16.8% share. About 44.4% of the portfolio is allocated to interactive media & services while entertainment and media round off the next three. The product charges 13 bps in annual fees and trades in an average daily volume of 3 million shares. It has a Zacks ETF Rank #2 (Buy) (read: Bunch of Leveraged Communication Services ETFs Hit Market).
This fund also targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 109 stocks in its basket, Facebook takes the second spot with 12.9% share. Interactive media & services is the top sector accounting for 39.2% of the portfolio, while integrated telecommunication services and movies & entertainment round off the next two. VOX has AUM of $1.3 billion and trades in a good volume of 260,000 shares a day on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
Fidelity MSCI Communication Services Index ETF (FCOM - Free Report)
This fund follows the MSCI USA IMI Communication Services 25/50 Index. It holds 103 stocks in its basket with Facebook occupying the top position at 13.5%. Interactive media & services takes the top spot at nearly 38.9%, while diversified telecommunication services, entertainment, and media round off the next three spots. The product has amassed $270.7 million in its asset base and trades in average daily volume of 110,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook (read: 4 Top-Ranked Undervalued Sector ETFs to Buy in 2019).
This ETF provides global exposure to companies in media, entertainment, social media, search engine, video/gaming and telecommunication services by tracking the S&P Global 1200 Communication Services Sector Index. It holds 67 stocks in its basket with Facebook taking the top spot at 10.1% share. Interactive media & services, integrated telecommunication services and movies & entertainment are the top three sectors with double-digit exposure each. The fund has amassed $245.9 million in its asset base, while trades in an average daily volume of 72,000 shares. Expense ratio came in at 0.47%. IXP has a Zacks ETF Rank #2 with a Medium risk outlook.
This is the pure play ETF in the global social media space and has amassed $132.9 million in its asset base. The ETF charges 0.65% in annual fees, and sees moderate trading volumes of roughly 42,000 shares a day. The product tracks the Solactive Social Media Total Return Index, holding 40 securities in the basket. Of these firms, Facebook takes the third spot, making up for 9.4% of assets. The fund has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
This fund follows the Nasdaq Internet Index, giving investors exposure to the broad U.S. Internet industry. It holds about 92 stocks in its basket with AUM of $530.9 million, while charging 60 bps in fees per year. The product trades in a lower volume of around 41,000 shares a day. Facebook takes the second spot with 8.1% allocation. In terms of industrial exposure, Interactive media & services, and Internet & direct marketing retail takes the largest share at 34.7% and 30.6%, respectively. PNQI has a Zacks ETF Rank #3 with a High risk outlook (read: A Pack of ETFs to Buy for 2019).
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Facebook Jumps on Solid Q4 Results: ETFs Set to Surge
After the closing bell on Wednesday, Facebook cheered Wall Street with robust fourth-quarter 2018 results, wherein it came up with huge revenue and earnings beat. This has reassured investors about the social media giant’s growth, allaying fears related to the company's privacy practice.
Q4 Results in Focus
Adjusted earnings per share came in at $2.38, crushing the Zacks Consensus Estimate of $2.17 and increasing 65% from year-ago earnings. Revenues soared 30.4% year over year to $16.91 billion and edged past the estimated $16.4 billion. However, it represents the slowest quarterly revenue growth in more than six years (read: FAANG ETFs in Focus Ahead of Q4 Earnings).
Notably, mobile advertising revenues accounted for 93% of total advertising revenues, up from 89% in the year-ago quarter. Both daily and monthly active users grew 9% year over year to 1.52 billion and 2.32 billion, respectively. The company estimates that more than 2.7 billion people use Facebook, WhatsApp, Instagram or Messenger ("Family" of services) each month, and more than 2 billion people use at least one of the Family of services every day on average.
The social media giant expects revenues to decelerate by mid single digits, excluding currency fluctuations, in the first quarter and continue to slow down throughout the year due to shifts in its advertising business. Facebook has been running more promotions in messaging apps and in user posts called "stories" that only last 24 hours, because the main Facebook news feed is so popular it has less room to grow. Those newer ads are less lucrative at the moment. The company also expects total expenses to rise 40-50% for the full year.
Market Impact
Following the results, shares of FB jumped more than 12% to its highest level since last August in aftermarket hours on elevated volume. Currently, Facebook has a Zacks Rank #3 (Hold) and a solid Growth Score of B. It further belongs to a top-ranked Zacks industry (top 40%).
ETFs to Watch
Given this, ETFs having a larger allocation to the networking giant are poised to surge post Facebook results. We have highlighted six of them in detail below:
Communication Services Select Sector SPDR (XLC)
This ETF offers exposure to the communication services sector of the S&P 500 index and has accumulated $3.9 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Facebook occupying the top position holding 16.8% share. About 44.4% of the portfolio is allocated to interactive media & services while entertainment and media round off the next three. The product charges 13 bps in annual fees and trades in an average daily volume of 3 million shares. It has a Zacks ETF Rank #2 (Buy) (read: Bunch of Leveraged Communication Services ETFs Hit Market).
Vanguard Communication Services ETF (VOX - Free Report)
This fund also targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 109 stocks in its basket, Facebook takes the second spot with 12.9% share. Interactive media & services is the top sector accounting for 39.2% of the portfolio, while integrated telecommunication services and movies & entertainment round off the next two. VOX has AUM of $1.3 billion and trades in a good volume of 260,000 shares a day on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
Fidelity MSCI Communication Services Index ETF (FCOM - Free Report)
This fund follows the MSCI USA IMI Communication Services 25/50 Index. It holds 103 stocks in its basket with Facebook occupying the top position at 13.5%. Interactive media & services takes the top spot at nearly 38.9%, while diversified telecommunication services, entertainment, and media round off the next three spots. The product has amassed $270.7 million in its asset base and trades in average daily volume of 110,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook (read: 4 Top-Ranked Undervalued Sector ETFs to Buy in 2019).
iShares Global Comm Services ETF (IXP - Free Report)
This ETF provides global exposure to companies in media, entertainment, social media, search engine, video/gaming and telecommunication services by tracking the S&P Global 1200 Communication Services Sector Index. It holds 67 stocks in its basket with Facebook taking the top spot at 10.1% share. Interactive media & services, integrated telecommunication services and movies & entertainment are the top three sectors with double-digit exposure each. The fund has amassed $245.9 million in its asset base, while trades in an average daily volume of 72,000 shares. Expense ratio came in at 0.47%. IXP has a Zacks ETF Rank #2 with a Medium risk outlook.
Global X Social Media Index ETF (SOCL - Free Report)
This is the pure play ETF in the global social media space and has amassed $132.9 million in its asset base. The ETF charges 0.65% in annual fees, and sees moderate trading volumes of roughly 42,000 shares a day. The product tracks the Solactive Social Media Total Return Index, holding 40 securities in the basket. Of these firms, Facebook takes the third spot, making up for 9.4% of assets. The fund has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
Invesco NASDAQ Internet ETF (PNQI - Free Report)
This fund follows the Nasdaq Internet Index, giving investors exposure to the broad U.S. Internet industry. It holds about 92 stocks in its basket with AUM of $530.9 million, while charging 60 bps in fees per year. The product trades in a lower volume of around 41,000 shares a day. Facebook takes the second spot with 8.1% allocation. In terms of industrial exposure, Interactive media & services, and Internet & direct marketing retail takes the largest share at 34.7% and 30.6%, respectively. PNQI has a Zacks ETF Rank #3 with a High risk outlook (read: A Pack of ETFs to Buy for 2019).
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 >>