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Facebook Tops, Warns of Uncertainty: ETFs in Focus
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After the closing bell on Jan 27, Facebook delivered robust fourth-quarter 2021 results wherein it beat both earnings and revenue estimates. However, the company’s warning over advertising revenues for this year made investors jittery.
Earnings in Focus
Adjusted earnings per share came in at $3.88, well above the Zacks Consensus Estimate of $3.24 and year-ago earnings of $2.56. Revenues increased 33% year over year to $28.1 billion and edged past the estimated $26.4 billion. The revenue growth represents the company’s fastest growth rate in more than two years. Notably, advertising revenues spiked 31% year over year to $27.2 billion. Better-than-expected results came form the stay-at-home trends that propelled the demand for e-commerce.
Daily and monthly active users grew 11% and 12% year over year to 1.84 billion and 2.80 billion, respectively. The company estimates that about 3.30 billion people use Facebook, WhatsApp, Instagram or Messenger (Family of services) each month, and about 2.60 billion people use at least one of the Family of services every day, on average.
Management said that the pandemic-driven surge in online commerce and shift in consumer demand to products over services — that buoyed revenue growth in 2020 — has been cooling steadily and would thus act as a headwind to advertising revenue growth this year. Additionally, the social media giant said it expects to face "significant ad targeting headwinds in 2021" as Apple's (AAPL - Free Report) update of its iPhone operating system to iOS 14 will start hurting revenues, beginning late in the first quarter. The company also warned of an "evolving regulatory landscape" in 2021 (read: What Lies Ahead for FAANG ETFs in Q4 Earnings).
Shares of Facebook initially dropped 6% in aftermarket hours and then recovered most of the losses to close down 0.6%. Currently, Facebook has a Zacks Rank #3 (Hold) and Growth Score of B. However, it belongs to a bottom-ranked Zacks industry (top 46%).
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 $11.9 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 at 21.2%. About 48.3% 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 an average daily volume of 2.9 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 15.6%. Interactive media & services takes the top spot at nearly 45.1%, while media, entertainment and diversified telecommunication services round off the next three positions. The product has amassed $657.2 million in its asset base and trades in an average daily volume of 106,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
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 15.7% share. Interactive media & services is the top sector, accounting for 45.8% of the portfolio, while movies & entertainment, cable & satellite, and integrated telecommunication services, round off the next three. VOX has AUM of $3.3 billion and trades in a good volume of 135,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 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 4.5/22.5/45 Capped Index. It holds 70 stocks in its basket with Facebook taking the top spot at 13.5% share. Interactive media & services dominates the fund’s return at 49%, followed by integrated telecommunication services (16.9%). The fund has amassed $317.7 million in its asset base, while trading in an average daily volume of 23,000 shares. Expense ratio comes in at 0.46%. IXP has a Zacks ETF Rank #3 with a Medium risk outlook (read: Netflix Pops on Solid Q4 Subscriber Growth: ETFs to Bet On).
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 $70.6 million in its asset base and charges 58 bps in annual fees. It trades in a meager volume of 12,000 shares a day, on average, and has a Zacks ETF Rank #3.
This fund provides investors access to social media companies around the world and has amassed $358.2 million in its asset base. It tracks the Solactive Social Media Total Return Index, holding 38 securities in the basket. Of these firms, Facebook takes the third spot, making up for 7.9% of assets. The ETF charges 0.65% in annual fees and sees moderate trading volumes of roughly 64,000 shares a day. The fund has a Zacks ETF Rank #3 with a High risk outlook (read: 10 Top-Ranked ETFs That Have Outperformed in 2020).
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Facebook Tops, Warns of Uncertainty: ETFs in Focus
After the closing bell on Jan 27, Facebook delivered robust fourth-quarter 2021 results wherein it beat both earnings and revenue estimates. However, the company’s warning over advertising revenues for this year made investors jittery.
Earnings in Focus
Adjusted earnings per share came in at $3.88, well above the Zacks Consensus Estimate of $3.24 and year-ago earnings of $2.56. Revenues increased 33% year over year to $28.1 billion and edged past the estimated $26.4 billion. The revenue growth represents the company’s fastest growth rate in more than two years. Notably, advertising revenues spiked 31% year over year to $27.2 billion. Better-than-expected results came form the stay-at-home trends that propelled the demand for e-commerce.
Daily and monthly active users grew 11% and 12% year over year to 1.84 billion and 2.80 billion, respectively. The company estimates that about 3.30 billion people use Facebook, WhatsApp, Instagram or Messenger (Family of services) each month, and about 2.60 billion people use at least one of the Family of services every day, on average.
Management said that the pandemic-driven surge in online commerce and shift in consumer demand to products over services — that buoyed revenue growth in 2020 — has been cooling steadily and would thus act as a headwind to advertising revenue growth this year. Additionally, the social media giant said it expects to face "significant ad targeting headwinds in 2021" as Apple's (AAPL - Free Report) update of its iPhone operating system to iOS 14 will start hurting revenues, beginning late in the first quarter. The company also warned of an "evolving regulatory landscape" in 2021 (read: What Lies Ahead for FAANG ETFs in Q4 Earnings).
Shares of Facebook initially dropped 6% in aftermarket hours and then recovered most of the losses to close down 0.6%. Currently, Facebook has a Zacks Rank #3 (Hold) and Growth Score of B. However, it belongs to a bottom-ranked Zacks industry (top 46%).
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 $11.9 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 at 21.2%. About 48.3% 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 an average daily volume of 2.9 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 15.6%. Interactive media & services takes the top spot at nearly 45.1%, while media, entertainment and diversified telecommunication services round off the next three positions. The product has amassed $657.2 million in its asset base and trades in an average daily volume of 106,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
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 15.7% share. Interactive media & services is the top sector, accounting for 45.8% of the portfolio, while movies & entertainment, cable & satellite, and integrated telecommunication services, round off the next three. VOX has AUM of $3.3 billion and trades in a good volume of 135,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 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 13.5% share. Interactive media & services dominates the fund’s return at 49%, followed by integrated telecommunication services (16.9%). The fund has amassed $317.7 million in its asset base, while trading in an average daily volume of 23,000 shares. Expense ratio comes in at 0.46%. IXP has a Zacks ETF Rank #3 with a Medium risk outlook (read: Netflix Pops on Solid Q4 Subscriber Growth: ETFs to Bet On).
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 $70.6 million in its asset base and charges 58 bps in annual fees. It trades in a meager volume of 12,000 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 $358.2 million in its asset base. It tracks the Solactive Social Media Total Return Index, holding 38 securities in the basket. Of these firms, Facebook takes the third spot, making up for 7.9% of assets. The ETF charges 0.65% in annual fees and sees moderate trading volumes of roughly 64,000 shares a day. The fund has a Zacks ETF Rank #3 with a High risk outlook (read: 10 Top-Ranked ETFs That Have Outperformed in 2020).
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 >>