Social media giant Facebook (FB - Analyst Report) once again reported blockbuster results for Q4 on a big jump in its mobile advertising business and the strongest revenue growth in two years. The company surpassed our estimates on both top and bottom lines for the third consecutive quarter, lending optimism to the future growth story.
Earnings per share came in at 31 cents per share, strongly outpacing the Zacks Consensus Estimate of 21 cents, and 82% above the year-ago earnings. Revenues climbed 63% year over year to $2.59 billion and surpassed our estimate of $2.36 billion (read: 3 ETFs with the Most Facebook (FB - Analyst Report) Exposure in Focus).
This robust performance was driven by a 76% year-over-year increase in advertising revenues. Mobile advertising revenues reached $1 billion for the first time in the company’s history and accounted for 53% of total revenue, up from 49% in prior quarter and 23% in the year-ago quarter.
The company saw remarkable growth in both daily (22% to 757 million) and monthly active users (16% to 1.23 billion) in 2013.
Following the astounding earnings beat, shares of FB soared as much as 12% to a new high of $60 in after-market hours trading, while shares were trading around $62.20 in early Thursday trading on heavy volume (read: Ride the Facebook Surge with These ETFs).
Though declining teen user growth remains a major concern, Facebook’s decision to allow teen users to make public posts is a positive step.
The company is still leading the social media market and its services such as Messenger and Instagram are attracting users. In addition, the new products such as Video ads and Reader are expected to drive top-line growth, going forward.
The company continues to gain market share in the U.S. digital advertising market, in particular the mobile advertisement segment, which is a key growth catalyst. Facebook overtook Yahoo (YHOO) and Microsoft (MSFT) to become the second firm in the digital advertising market, trailing Google (GOOG), as per eMarketer.
Apart from these, FB recently made its entry into the S&P 500 benchmark, providing a big boost to the company’s brand. Moreover, Facebook currently has a Zacks Rank #2 (Buy) and a solid Zacks Industry Rank in the top 34%, suggesting that the bullish trend will definitely continue in the near future (read: Will Investors 'Like' these ETFs as Facebook Joins SP 500?).
ETFs to Buy
Based on impressive results and solid growth prospects, investors could definitely focus on ETFs that have a larger allocation to this social network giant and grab any opportunity from a surge in the FB price. For those investors, we have highlighted three ETFs below that are poised to move upward following FB Q4 results:
Global X Social Media Index ETF (SOCL - ETF report)
This ETF offers the only pure play in the social media space and has amassed $131.7 million in its asset base. The ETF charges 0.65% in fees and expenses and sees good volumes of more than 190,000 shares a day.
The product tracks the Solactive Social Media Index, holding 27 securities in the basket. Of these firms, Facebook takes the second spot, making up roughly 10.46% of assets. In terms of country exposure, U.S. firms take more than half the portfolio, closely followed by China (25%) and Japan (8%).
The ETF is down nearly 5% year-to-date and currently has a Zacks ETF Rank of 2 or ‘Buy’ rating with a ‘High’ risk outlook (read: 3 ETFs to Watch for Big Moves This Year).
First Trust US IPO Index Fund (FPX - ETF report)
This ETF provides exposure to the booming U.S. IPO market by tracking the IPOX-100 U.S. Index. The fund has accumulated $382.7 million in AUM and charges 60 bps in fees a year. Volume is good as it exchanges nearly 110,000 shares a day on average (read: Can IPO ETFs Remain Hot in 2014?).
In total, the fund holds 100 securities in its basket with FB at the top with 10.11% allocation. The product is slight tilted toward consumer discretionary at nearly 27% while information technology, energy and healthcare round off the next three spots. FPX lost over 4% so far this year.
PowerShares Nasdaq Internet Portfolio (PNQI - ETF report) )
This fund follows the Nasdaq Internet Index, giving investors exposure to the broad Internet industry. The fund holds 80 stocks in its basket with AUM of $315.9 million while charging 60 bps in fees per year. The ETF trades in light volume of nearly 67,000 shares a day.
Facebook occupies the top position in the basket with 9% of assets. In terms of industry exposure, the Internet mobile application sector makes up for more than two-third share in the basket, followed by Internet retail (30%). PNQI is down nearly 4.5% year-to-date and has a Zacks ETF Rank of 1 or ‘Strong Buy’ with a ‘High’ risk outlook.
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