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Facebook Beats on Q2 Earnings, Shares Fall: ETFs in Focus

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After the closing bell on Jul 28, Facebook (FB - Free Report) delivered robust second-quarter 2021 results wherein it beat both earnings and revenue estimates.

Adjusted earnings per share came in at $3.61, well above the Zacks Consensus Estimate of $3.03 and up 101% from the year-ago earnings. Revenues climbed 56% year over year to $29.1 billion and edged past the estimated $23.93 billion. This represents the fastest growth since 2016. Notably, advertising revenues spiked 56% year over year to $28.6 billion driven by a 47% year-over-year increase in the average price per ad and a 6% increase in the number of ads delivered.

Daily and monthly active users grew 7% year over year each to 1.91 billion and 2.90 billion, respectively. The company stated that about 3.51 billion people use Facebook, WhatsApp, Instagram or Messenger (Family of services) each month, and about 2.76 billion people use at least one of the Family of services every day, on average (read: Why Tech Investors Should not Ignore These ETFs).

The world’s largest social media platform warned that its revenue growth would decelerate significantly on a sequential basis over the next six months due to softening of lockdowns and the end of the screen time boom.

Despite the solid results, shares of Facebook dropped as much as 5% in aftermarket hours. Currently, Facebook has a Zacks Rank #3 (Hold) and Growth Score of A. However, it belongs to a bottom-ranked Zacks industry (bottom 28%).

ETFs in Focus

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 Fund (XLC - Free Report)

This ETF offers exposure to companies from telecommunication services, media, entertainment and interactive media & services, and has accumulated $14.4 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 half of the portfolio is allocated to interactive media & services while entertainment, and media round off the next two. The product charges 12 bps in annual fees and trades in an average daily volume of 3.7 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 113 stocks in its basket with Facebook occupying the top position at 16.9%. Interactive media & services takes the top spot at 48.4%, while entertainment, media and diversified telecommunication services round off the next three positions. The product has amassed $921.9 million in its asset base and trades in an average daily volume of 105,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 3 Solid Reasons to Bet on Big Tech ETFs and Stocks).

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 116 stocks in its basket, Facebook takes the second spot with 16.7% share. Interactive media & services is the top sector, accounting for 48.4% of the portfolio, while movies & entertainment, cable & satellite, and integrated telecommunication services round off the next three. VOX has AUM of $4.6 billion and trades in a good volume of 164,000 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 68 stocks in its basket with Facebook taking the top spot at 16.6% share. Interactive media & services dominates the fund’s return at 49.6%, followed by integrated telecommunication services (17.5%). The fund has amassed $333.2 million in its asset base while trading at an average daily volume of 11,000 shares. Expense ratio comes in at 0.46%. IXP has a Zacks ETF Rank #3 with a Medium risk outlook.

UPHOLDINGS Compound Kings ETF (KNGS - Free Report)

This fund is actively managed and seeks long-term growth and income primarily by investing in compounders: companies with the potential to reinvest their own cash flow at above-average rates of return. It holds 26 stocks in its basket with Facebook taking the top spot with 15.2% of assets. The ETF has accumulated $12.2 million in its asset base since its debut last December and charges 60 bps in annual basis. It trades in a volume of 2,000 shares per day on average.

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

This fund provides investors access to social media companies around the world and has amassed $465.7 million in its asset base. It tracks the Solactive Social Media Total Return Index, holding 42 securities in the basket. Of these firms, Facebook takes the top spot, making up for 12.7% of assets. The ETF charges 0.65% in annual fees and sees lower trading volumes of roughly 34,000 shares a day. The fund has a Zacks ETF Rank #3 with a High risk outlook (read: Play These ETFs as Twitter Rises on Q2 Earnings Strength).

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