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Social Media ETF Surges Ahead of Key Earnings

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Global X Social Media ETF (SOCL - Free Report) jumped 4.9% on Oct 21. Snap’s (SNAP - Free Report) stellar earnings results apparently led to gains as the company’s solid Q3 acted as a cornerstone for the entire space (read: ETFs to Gain as Snap Shares Skyrocket on Stellar Q3 Earnings).

Snap, known for its mobile camera communication application Snapchat, saw its shares gain more than 28% on Oct 21 post Q3 earnings results. Snap swung to earnings of 1 cent per share from the Zacks Consensus Estimate of a loss of 6 cents. The company still posted a net loss of $200 million, but that’s a 12% improvement from last year’s numbers. Revenues of $679 million crushed the Zacks Consensus Estimate of $551 million. Revenues grew 52% year over year.  

The social-media company had 249 million daily active users (DAU) in the third quarter, up 11 million from the second quarter. Analysts polled by FactSet predicted 5 million net new daily active users sequentially, as quoted on MarketWatch.

Such upbeat results bolstered investors’ sentiments toward other social media companies like Twitter and Facebook . Twitter was up 8.4% on Oct 21 while Facebook advanced 4.2% on the day. Both companies will report earnings this month. Let’s take a look what’s waiting for the duo this earnings season and how will their earnings will impact the social media ETF.

Per our proven model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Inside Our Earnings Prediction

Twitter is set to report on Oct 29, after market close. It has a Zacks Rank #3 and an Earnings ESP of +26.23%. The stock saw positive earnings estimate revision of a penny over the past 730 days for the to-be-reported quarter. Analysts raised their estimates for the coming two fiscal years in the past seven days, which is a good indicator for the stock.

Facebook is also slated to release earnings after market close on Oct 29. It has a Zacks Rank #3 and an Earnings ESP of +2.34%. The stock saw positive earnings estimate revision activity over the past seven days for the to-be-reported quarter and delivered a surprise of 9.11%, on average, over the preceding four quarters (see: all the Technology ETFs here).

SOCL in Focus

Twitter takes the top spot in SOCL with about 9.69% weight while Facebook takes about 9.66% weight and occupies the second spot. Snap has about 7.85% weight in the 39-stock fund. The fund charges 65 bps in fees. The product has a Zacks Rank #2.

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