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After the closing bell on Wednesday, Facebook cheered Wall Street with robust first-quarter 2019 results, wherein it came up with revenue and earnings beat. This has reassured investors about the social media giant’s growth, allaying concerns related to the company's privacy practice and the impact of regulatory threats.
Q1 Results in Focus
Adjusted earnings per share came in at $1.89, crushing the Zacks Consensus Estimate of $1.66 and increasing from the year-ago earnings of $1.69. Revenues soared 26% year over year to $15.08 billion and edged past the estimated $14.97 billion. Robust results were driven by higher demand for the photo-sharing app Instagram and advertising in its Stories feature, a Snapchat copycat. An e-commerce product called Checkout, which allows people to buy products within Instagram, also led to the spike.
The company may have to pay a multi-billion dollar fine to the U.S. Federal Trade Commission (FTC). It took a $3 billion charge in the first quarter due to the ongoing FTC inquiry and estimates that the loss related to any settlement could be as high as $5 billion (read: What's in the Cards for FAANG ETFs This Earnings Season?).
Notably, mobile advertising revenues accounted for 93% of total advertising revenues, up from 91% in the year-ago quarter. Both daily and monthly active users grew 8% year over year to 1.56 billion and 2.38 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 2.1 billion people use at least one of the Family of services every day on average.
The social media giant expects revenues to decelerate sequentially throughout 2019 on a constant currency basis. The company expects advertising related headwinds will be more pronounced in the second half of 2019. It also forecast full-year total expenses to increase 47-55% from 2018 versus the prior guidance of 40-50%.
Market Impact
Following the results, shares of FB jumped as much as 11% in aftermarket hours on elevated volume. Currently, Facebook has a Zacks Rank #3 (Hold) and solid Growth Score of B. Moreover, it belongs to a bottom-ranked Zacks industry (bottom 38%).
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 - Free Report)
This ETF offers exposure to the communication services sector of the S&P 500 Index and has accumulated $5.8 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 19% share. About 47.7% 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 3.5 million shares. It has a Zacks ETF Rank #1 (Strong) (read: U.S. Stocks Near Record High: Top-Ranked ETFs to Buy).
This fund also targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 107 stocks in its basket, Facebook takes the second spot with 14.6% share. Interactive media & services is the top sector accounting for 42.5% of the portfolio, while movies & entertainment, integrated telecommunication services and cable & satellite round off the next two. VOX has AUM of $1.9 billion and trades in a good volume of 310,000 shares a day on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #1 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 106 stocks in its basket with Facebook occupying the top position at 15.1%. Interactive media & services takes the top spot at nearly 42.5%, while media, entertainment, and diversified telecommunication services round off the next three spots. The product has amassed $347.3 million in its asset base and trades in average daily volume of 128,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook.
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 11.8% share. Interactive media & services dominate the fund’s return at 40.9%, while integrated telecommunication services and movies & entertainment round off the top three with double-digit exposure each. The fund has amassed $255.9 million in its asset base, while trades in an average daily volume of 51,000 shares. Expense ratio came in at 0.47%. IXP has a Zacks ETF Rank #1 with a Medium risk outlook.
This is the pure-play ETF in the global social media space and has amassed $144.1 million in its asset base. The ETF charges 0.65% in annual fees, and sees moderate trading volumes of roughly 33,000 shares a day. The product tracks the Solactive Social Media Total Return Index, holding 39 securities in the basket. Of these firms, Facebook takes the third spot, making up for 10.3% of assets. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: 5 Top-Ranked ETFs & Stocks to Bloom in Spring).
This fund follows the Nasdaq Internet Index, giving investors exposure to the broad U.S. Internet industry. It holds about 85 stocks in its basket with AUM of $598.6 million, while charging 60 bps in fees per year. The product trades in a lower volume of around 33,000 shares a day. Facebook takes the second spot with 8.4% allocation. In terms of industrial exposure, Internet & direct marketing retail, and Interactive media & services takes the largest share at 37.9% and 32.8%, respectively. PNQI has a Zacks ETF Rank #3 with a High risk outlook.
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ETFs to Soar After Facebook's Solid Q1 Results
After the closing bell on Wednesday, Facebook cheered Wall Street with robust first-quarter 2019 results, wherein it came up with revenue and earnings beat. This has reassured investors about the social media giant’s growth, allaying concerns related to the company's privacy practice and the impact of regulatory threats.
Q1 Results in Focus
Adjusted earnings per share came in at $1.89, crushing the Zacks Consensus Estimate of $1.66 and increasing from the year-ago earnings of $1.69. Revenues soared 26% year over year to $15.08 billion and edged past the estimated $14.97 billion. Robust results were driven by higher demand for the photo-sharing app Instagram and advertising in its Stories feature, a Snapchat copycat. An e-commerce product called Checkout, which allows people to buy products within Instagram, also led to the spike.
The company may have to pay a multi-billion dollar fine to the U.S. Federal Trade Commission (FTC). It took a $3 billion charge in the first quarter due to the ongoing FTC inquiry and estimates that the loss related to any settlement could be as high as $5 billion (read: What's in the Cards for FAANG ETFs This Earnings Season?).
Notably, mobile advertising revenues accounted for 93% of total advertising revenues, up from 91% in the year-ago quarter. Both daily and monthly active users grew 8% year over year to 1.56 billion and 2.38 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 2.1 billion people use at least one of the Family of services every day on average.
The social media giant expects revenues to decelerate sequentially throughout 2019 on a constant currency basis. The company expects advertising related headwinds will be more pronounced in the second half of 2019. It also forecast full-year total expenses to increase 47-55% from 2018 versus the prior guidance of 40-50%.
Market Impact
Following the results, shares of FB jumped as much as 11% in aftermarket hours on elevated volume. Currently, Facebook has a Zacks Rank #3 (Hold) and solid Growth Score of B. Moreover, it belongs to a bottom-ranked Zacks industry (bottom 38%).
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 - Free Report)
This ETF offers exposure to the communication services sector of the S&P 500 Index and has accumulated $5.8 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 19% share. About 47.7% 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 3.5 million shares. It has a Zacks ETF Rank #1 (Strong) (read: U.S. Stocks Near Record High: Top-Ranked ETFs to Buy).
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 107 stocks in its basket, Facebook takes the second spot with 14.6% share. Interactive media & services is the top sector accounting for 42.5% of the portfolio, while movies & entertainment, integrated telecommunication services and cable & satellite round off the next two. VOX has AUM of $1.9 billion and trades in a good volume of 310,000 shares a day on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #1 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 106 stocks in its basket with Facebook occupying the top position at 15.1%. Interactive media & services takes the top spot at nearly 42.5%, while media, entertainment, and diversified telecommunication services round off the next three spots. The product has amassed $347.3 million in its asset base and trades in average daily volume of 128,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook.
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 11.8% share. Interactive media & services dominate the fund’s return at 40.9%, while integrated telecommunication services and movies & entertainment round off the top three with double-digit exposure each. The fund has amassed $255.9 million in its asset base, while trades in an average daily volume of 51,000 shares. Expense ratio came in at 0.47%. IXP has a Zacks ETF Rank #1 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 $144.1 million in its asset base. The ETF charges 0.65% in annual fees, and sees moderate trading volumes of roughly 33,000 shares a day. The product tracks the Solactive Social Media Total Return Index, holding 39 securities in the basket. Of these firms, Facebook takes the third spot, making up for 10.3% of assets. The fund has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: 5 Top-Ranked ETFs & Stocks to Bloom in Spring).
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 85 stocks in its basket with AUM of $598.6 million, while charging 60 bps in fees per year. The product trades in a lower volume of around 33,000 shares a day. Facebook takes the second spot with 8.4% allocation. In terms of industrial exposure, Internet & direct marketing retail, and Interactive media & services takes the largest share at 37.9% and 32.8%, respectively. PNQI has a Zacks ETF Rank #3 with a High risk outlook.
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>