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Will Google ETFs Keep Shining on Q4 Earnings Optimism?
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Google-parent Alphabet (GOOGL - Free Report) recently reported fourth-quarter 2020 results, with earnings and revenues topping estimates and increasing on a year-over-year basis. Notably, Alphabet’s share price surged 7.6% in after-hour trading on impressive earnings results on Feb 2.
Q4 Earnings at a Glance
Earnings per share were $22.30, beating the Zacks Consensus Estimate of $15.91 and increasing 36% sequentially and 45.3% year over year. Net revenues, excluding total traffic acquisition cost or TAC (TAC is the portion of revenues shared with Google’s partners, and amount paid to distribution partners and others who direct traffic to the Google website), came in at $46.43 billion, gaining 22.2% sequentially and 23.6% year over year. Net revenues surpassed the Zacks Consensus Estimate by 5.3%, largely on strong performances by the company’s search, cloud and YouTube businesses.
Alphabet’s business segments include Google Services, Google Cloud and Other Bets. Revenues from the Google Services business increased 22.4% year over year to $52.8 billion, accounting for 92.9% of quarterly revenues. Under the services business, search revenues from Google-owned sites increased 17.4% year over year. YouTube advertising revenues grew 46% year over year to $6.9 billion, while Network advertising revenues increased 23% to $7.4 billion.
Google other revenues — which consist of YouTube non-advertising revenues — were $6.7 billion for the fourth quarter, up 26.8% year over year, driven by growth in YouTube non-advertising and Play revenues. Total Google advertising revenues grew 21.8% year over year to $46.2 billion.
Moreover, Google Cloud revenues grew 46.6% year over year to $3.8 billion, accounting for 6.7% of the quarterly revenues. Notably, with the aggravating coronavirus situation, some industries like cloud computing have been thriving with majority of people working from home. Other Bets revenues were $196 million, up 14% year over year, accounting for 0.3% of total fourth-quarter revenues.
Meanwhile, TAC was up 23.1% year over year to $10.5 billion.
Commenting on the results, Sundar Pichai, CEO of Google and Alphabet reportedly said that “our strong results this quarter reflect the helpfulness of our products and services to people and businesses, as well as the accelerating transition to online services and the cloud.”
ETFs in Focus
The earnings results might have a huge impact on ETFs that are heavily invested in this Internet giant. Below we have highlighted four ETFs with double-digit exposure to Alphabet (see: all the Technology ETFs here).
This fund targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 112 stocks in its basket, Alphabet takes the second (Class C) and third (Class A) spot, with 10.52% share, each. VOX has AUM of $3.28 billion and charges 10 basis points (bps) in annual fees. The fund has a Zacks ETF Rank #3 (Hold), with a Medium-risk outlook (read: Facebook Tops, Warns of Uncertainty: ETFs in Focus).
Fidelity MSCI Communication Services Index ETF (FCOM - Free Report)
This fund follows the MSCI US IMI Communication Services 25/50 Index. It holds 103 stocks in its basket, with Alphabet occupying the second (Class C) and third position (Class A) at 11.07% and 11.02%. The product has amassed $657.2 million in its asset base and charges 8 bps in annual fees. It has a Zacks ETF Rank #3, with a Medium-risk outlook.
The Communication Services Select Sector SPDR Fund (XLC - Free Report)
This ETF tracks the communication services sector of the S&P 500 Index and has accumulated $11.87 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Alphabet Inc. Class A and Alphabet Inc. Class C occupying the second and third position, with 12.91% and 12.53% weights, respectively. The product charges 12 bps in annual fees. It has a Zacks ETF Rank #2 (Buy) (read: A Look Back At the S&P 500 Sector ETFs in 2020).
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 Alphabet Inc. Class A and Alphabet Inc. Class C occupying the second and third position, with 12.23% and 11.88% weights, respectively. The fund has amassed $317.7 million in its asset base. Its expense ratio came 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).
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Will Google ETFs Keep Shining on Q4 Earnings Optimism?
Google-parent Alphabet (GOOGL - Free Report) recently reported fourth-quarter 2020 results, with earnings and revenues topping estimates and increasing on a year-over-year basis. Notably, Alphabet’s share price surged 7.6% in after-hour trading on impressive earnings results on Feb 2.
Q4 Earnings at a Glance
Earnings per share were $22.30, beating the Zacks Consensus Estimate of $15.91 and increasing 36% sequentially and 45.3% year over year. Net revenues, excluding total traffic acquisition cost or TAC (TAC is the portion of revenues shared with Google’s partners, and amount paid to distribution partners and others who direct traffic to the Google website), came in at $46.43 billion, gaining 22.2% sequentially and 23.6% year over year. Net revenues surpassed the Zacks Consensus Estimate by 5.3%, largely on strong performances by the company’s search, cloud and YouTube businesses.
Alphabet’s business segments include Google Services, Google Cloud and Other Bets. Revenues from the Google Services business increased 22.4% year over year to $52.8 billion, accounting for 92.9% of quarterly revenues. Under the services business, search revenues from Google-owned sites increased 17.4% year over year. YouTube advertising revenues grew 46% year over year to $6.9 billion, while Network advertising revenues increased 23% to $7.4 billion.
Google other revenues — which consist of YouTube non-advertising revenues — were $6.7 billion for the fourth quarter, up 26.8% year over year, driven by growth in YouTube non-advertising and Play revenues. Total Google advertising revenues grew 21.8% year over year to $46.2 billion.
Moreover, Google Cloud revenues grew 46.6% year over year to $3.8 billion, accounting for 6.7% of the quarterly revenues. Notably, with the aggravating coronavirus situation, some industries like cloud computing have been thriving with majority of people working from home. Other Bets revenues were $196 million, up 14% year over year, accounting for 0.3% of total fourth-quarter revenues.
Meanwhile, TAC was up 23.1% year over year to $10.5 billion.
Commenting on the results, Sundar Pichai, CEO of Google and Alphabet reportedly said that “our strong results this quarter reflect the helpfulness of our products and services to people and businesses, as well as the accelerating transition to online services and the cloud.”
ETFs in Focus
The earnings results might have a huge impact on ETFs that are heavily invested in this Internet giant. Below we have highlighted four ETFs with double-digit exposure to Alphabet (see: all the Technology ETFs here).
Vanguard Communication Services ETF (VOX - Free Report)
This fund targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 112 stocks in its basket, Alphabet takes the second (Class C) and third (Class A) spot, with 10.52% share, each. VOX has AUM of $3.28 billion and charges 10 basis points (bps) in annual fees. The fund has a Zacks ETF Rank #3 (Hold), with a Medium-risk outlook (read: Facebook Tops, Warns of Uncertainty: ETFs in Focus).
Fidelity MSCI Communication Services Index ETF (FCOM - Free Report)
This fund follows the MSCI US IMI Communication Services 25/50 Index. It holds 103 stocks in its basket, with Alphabet occupying the second (Class C) and third position (Class A) at 11.07% and 11.02%. The product has amassed $657.2 million in its asset base and charges 8 bps in annual fees. It has a Zacks ETF Rank #3, with a Medium-risk outlook.
The Communication Services Select Sector SPDR Fund (XLC - Free Report)
This ETF tracks the communication services sector of the S&P 500 Index and has accumulated $11.87 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Alphabet Inc. Class A and Alphabet Inc. Class C occupying the second and third position, with 12.91% and 12.53% weights, respectively. The product charges 12 bps in annual fees. It has a Zacks ETF Rank #2 (Buy) (read: A Look Back At the S&P 500 Sector ETFs in 2020).
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 Alphabet Inc. Class A and Alphabet Inc. Class C occupying the second and third position, with 12.23% and 11.88% weights, respectively. The fund has amassed $317.7 million in its asset base. Its expense ratio came 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).
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 >>