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ETFs to Soar on Robust Facebook Q3 Earnings

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After the closing bell on Oct 29, Facebook delivered robust third-quarter 2020 results wherein it beat both earnings and revenue estimates.

Adjusted earnings per share came in at $2.71, well above the Zacks Consensus Estimate of $1.94 and year-ago earnings of $2.12. Revenues increased 22% year over year to $21.47 billion and edged past the estimated $19.89 billion. Notably, advertising revenues spiked 22% year over year to $21.2 billion. Better-than-expected results came form the stay-at-home trends that propelled the demand for e-commerce (read: Coronavirus-Themed ETFs in Focus as the Pandemic Worsens).

Daily and monthly active users grew 12% each year over year to 1.82 billion and 2.74 billion, respectively. The company estimates that about 3.21 billion people use Facebook, WhatsApp, Instagram or Messenger (Family of services) each month, and about 2.54 billion people use at least one of the Family of services every day, on average.

The social media giant expects daily and monthly active users to be flat or slightly down in the United States and Canada in the fourth quarter of 2020 from the third quarter. After two quarters of slowing growth amid the COVID-19 pandemic, Facebook’s advertising businesses appear to have returned to a steadily clip. As such, the company expects fourth-quarter advertising revenues to be higher than Q3 driven by continued strong advertiser demand during the holiday season.

Shares of Facebook traded in a tight range of down 0.4% to up 0.8% in aftermarket hours on elevated volumes. Currently, Facebook has a Zacks Rank #3 (Hold) and Growth Score of B. However, it belongs to a bottom-ranked Zacks industry (bottom 17%).

ETFs to Soar

Given this, investors seeking to bet on Facebook could consider ETFs having a larger allocation to the networking giant. 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 $10.4 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 at 23.5%. About 50.8% of the portfolio is allocated to interactive media & services, while entertainment, and media round off the next two. The product charges 13 bps in annual fees and trades in average daily volume of 3.4 million shares. It has a Zacks ETF Rank #2 (Buy).

Fidelity MSCI Communication Services Index ETF (FCOM - Free Report)

This fund follows the MSCI USA IMI Communication Services 25/50 Index. It holds 104 stocks in its basket with Facebook occupying the top position at 17.2%. Interactive media & services takes the top spot at nearly 46.1%, while media, entertainment and diversified telecommunication services round off the next three positions. The product has amassed $555.6 million in its asset base and trades in an average daily volume of 88,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: ETFs to Click as Facebook Tops $300 on E-Commerce Bets).

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 112 stocks in its basket, Facebook takes the second spot with 17.2% share. Interactive media & services is the top sector, accounting for 46.7% of the portfolio, while movies & entertainment, cable & satellite, and integrated telecommunication services, round off the next three. VOX has AUM of $2.7 billion and trades in a good volume of 196,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.

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 4.5/22.5/45 Capped Index. It holds 70 stocks in its basket with Facebook taking the top spot at 14.9% share. Interactive media & services dominates the fund’s return at 48.6%, followed by integrated telecommunication services (17.2%). The fund has amassed $319.7 million in its asset base, while trading in average daily volume of 15,000 shares. Expense ratio comes in at 0.46%. IXP has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

MicroSectors FANG+ ETN (FNGS - Free Report)

This ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar weighted index, designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion, with Facebook share coming in at 10%. The product has accumulated $58.5 million in its asset base and charges 58 bps in annual fees. It trades in a meager volume of 22,000 shares a day, on average, and has a Zacks ETF Rank #3.

Global X Social Media Index ETF (SOCL - Free Report)

This fund provides investors access to social media companies around the world and has amassed $226 million in its asset base. It 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 9.1% of assets. The ETF charges 0.65% in annual fees and sees moderate trading volumes of roughly 43,000 shares a day. The fund has a Zacks ETF Rank #2 with a High risk outlook (read: Social Media ETF Surges Ahead of Key Earnings).

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