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ETFs in Focus After Meta's First-Ever Revenue Drop
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After the closing bell on Jul 27, Facebook’s parent company Meta Platforms (META - Free Report) reported dismal second-quarter 2022 results, wherein it missed earnings estimates. The social media giant reported its first-ever quarterly drop in revenues and provided a gloomy forecast given the broader fallout in digital advertisement.
As such, FB shares dropped as much as 4.6% in aftermarket hours on elevated volume. This has put focus on ETFs — Communication Services Select Sector SPDR Fund (XLC - Free Report) , Fidelity MSCI Communication Services Index ETF (FCOM - Free Report) , Vanguard Communication Services ETF (VOX - Free Report) , iShares Global Comm Services ETF (IXP - Free Report) and UPHOLDINGS Compound Kings ETF (KNGS - Free Report) — with a substantial allocation to this social media giant.
Earnings in Focus
Adjusted earnings per share came in at $2.46, missing the Zacks Consensus Estimate of $2.50 but declining 32% from the year-ago earnings. Revenues dipped 1% year over year to $28.82 billion and came ahead of the estimated $28.7 billion. This marks Meta’s first year-over-year revenue decline since going public in 2012. Recession fears and competitive pressures weighed on its digital ads sales (read: ETFs in Focus Ahead of Big Tech Q2 Earnings).
Meta Platforms’ global daily active users increased 4% year over year to 2.88 billion. Monthly active users grew 4% year over year each to 3.65 billion. The company stated that about 2.93 billion people use at least one of the Family of services (Facebook, WhatsApp, Instagram or Messenger) every day, on average.
The world’s largest social media platform issued a weak revenue guidance for the third quarter. It expects revenues in the range of $26-$28.5 billion, flat to down compared with $28.3 billion in the third quarter of 2021 that will mark a second year-over-year drop in a row. Along with the decline in ad sales, Meta is facing pressure from the strong dollar and rising competition from the rival TikTok. It expects a 6% revenue growth headwind in the third quarter, based on the current exchange rates. Additionally, Meta forecasts third-quarter Reality Labs revenues to be lower than the second quarter.
ETFs in Focus
Communication Services Select Sector SPDR Fund (XLC - Free Report)
Communication Services Select Sector SPDR Fund offers exposure to companies from telecommunication services, media, entertainment and interactive media & services, and has accumulated $9.4 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Meta Platforms occupying the top position at 18.1%. About 46% of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two (see: all the Communication ETFs here).
Communication Services Select Sector SPDR Fund charges 10 bps in annual fees and trades in an average daily volume of 5.2 million shares. It has a Zacks ETF Rank #2 (Buy).
Fidelity MSCI Communication Services Index ETF (FCOM - Free Report)
Fidelity MSCI Communication Services Index ETF follows the MSCI USA IMI Communication Services 25/50 Index. It holds 115 stocks in its basket, with Meta Platforms occupying the top position at 12.5%. Interactive media & services takes the top spot at 42.3%, while media, entertainment, and diversified telecommunication services round off the next three positions.
Fidelity MSCI Communication Services Index ETF has amassed $543.6 million in its asset base and trades in an average daily volume of 150,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
Vanguard Communication Services ETF also targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 110 stocks in its basket, Meta Platform takes the top spot with a 12.4% share. Interactive media & services is the top sector, accounting for 42.2% of the portfolio, while movies & entertainment, integrated telecommunication services, and cable & satellite round off the next three (read: ETFs to Gain as Alphabet Rises Despite Q2 Earnings Miss).
Vanguard Communication Services ETF has AUM of $2.6 billion and trades in a good volume of 300,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
iShares Global Comm Services 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 73 stocks in its basket, with Meta Platforms taking the third spot at 10.6% share. Interactive media & services dominates the fund’s return at 44.3%, followed by integrated telecommunication services (19.5%).
iShares Global Comm Services ETF has amassed $280.6 million in its asset base while trading at an average daily volume of 58,000 shares. The expense ratio comes in at 0.43%. IXP has a Zacks ETF Rank #3 with a Medium risk outlook.
UPHOLDINGS Compound Kings ETF 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 Meta Platforms taking the second spot with 9.7% of assets.
UPHOLDINGS Compound Kings ETF has accumulated $7.7 million in its asset base and charges 60 bps on an annual basis. It trades in a volume of 1,000 shares per day on average.
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ETFs in Focus After Meta's First-Ever Revenue Drop
After the closing bell on Jul 27, Facebook’s parent company Meta Platforms (META - Free Report) reported dismal second-quarter 2022 results, wherein it missed earnings estimates. The social media giant reported its first-ever quarterly drop in revenues and provided a gloomy forecast given the broader fallout in digital advertisement.
As such, FB shares dropped as much as 4.6% in aftermarket hours on elevated volume. This has put focus on ETFs — Communication Services Select Sector SPDR Fund (XLC - Free Report) , Fidelity MSCI Communication Services Index ETF (FCOM - Free Report) , Vanguard Communication Services ETF (VOX - Free Report) , iShares Global Comm Services ETF (IXP - Free Report) and UPHOLDINGS Compound Kings ETF (KNGS - Free Report) — with a substantial allocation to this social media giant.
Earnings in Focus
Adjusted earnings per share came in at $2.46, missing the Zacks Consensus Estimate of $2.50 but declining 32% from the year-ago earnings. Revenues dipped 1% year over year to $28.82 billion and came ahead of the estimated $28.7 billion. This marks Meta’s first year-over-year revenue decline since going public in 2012. Recession fears and competitive pressures weighed on its digital ads sales (read: ETFs in Focus Ahead of Big Tech Q2 Earnings).
Meta Platforms’ global daily active users increased 4% year over year to 2.88 billion. Monthly active users grew 4% year over year each to 3.65 billion. The company stated that about 2.93 billion people use at least one of the Family of services (Facebook, WhatsApp, Instagram or Messenger) every day, on average.
The world’s largest social media platform issued a weak revenue guidance for the third quarter. It expects revenues in the range of $26-$28.5 billion, flat to down compared with $28.3 billion in the third quarter of 2021 that will mark a second year-over-year drop in a row. Along with the decline in ad sales, Meta is facing pressure from the strong dollar and rising competition from the rival TikTok. It expects a 6% revenue growth headwind in the third quarter, based on the current exchange rates. Additionally, Meta forecasts third-quarter Reality Labs revenues to be lower than the second quarter.
ETFs in Focus
Communication Services Select Sector SPDR Fund (XLC - Free Report)
Communication Services Select Sector SPDR Fund offers exposure to companies from telecommunication services, media, entertainment and interactive media & services, and has accumulated $9.4 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Meta Platforms occupying the top position at 18.1%. About 46% of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two (see: all the Communication ETFs here).
Communication Services Select Sector SPDR Fund charges 10 bps in annual fees and trades in an average daily volume of 5.2 million shares. It has a Zacks ETF Rank #2 (Buy).
Fidelity MSCI Communication Services Index ETF (FCOM - Free Report)
Fidelity MSCI Communication Services Index ETF follows the MSCI USA IMI Communication Services 25/50 Index. It holds 115 stocks in its basket, with Meta Platforms occupying the top position at 12.5%. Interactive media & services takes the top spot at 42.3%, while media, entertainment, and diversified telecommunication services round off the next three positions.
Fidelity MSCI Communication Services Index ETF has amassed $543.6 million in its asset base and trades in an average daily volume of 150,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
Vanguard Communication Services ETF (VOX - Free Report)
Vanguard Communication Services ETF also targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 110 stocks in its basket, Meta Platform takes the top spot with a 12.4% share. Interactive media & services is the top sector, accounting for 42.2% of the portfolio, while movies & entertainment, integrated telecommunication services, and cable & satellite round off the next three (read: ETFs to Gain as Alphabet Rises Despite Q2 Earnings Miss).
Vanguard Communication Services ETF has AUM of $2.6 billion and trades in a good volume of 300,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
iShares Global Comm Services ETF (IXP - Free Report)
iShares Global Comm Services 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 73 stocks in its basket, with Meta Platforms taking the third spot at 10.6% share. Interactive media & services dominates the fund’s return at 44.3%, followed by integrated telecommunication services (19.5%).
iShares Global Comm Services ETF has amassed $280.6 million in its asset base while trading at an average daily volume of 58,000 shares. The expense ratio comes in at 0.43%. IXP has a Zacks ETF Rank #3 with a Medium risk outlook.
UPHOLDINGS Compound Kings ETF (KNGS - Free Report)
UPHOLDINGS Compound Kings ETF 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 Meta Platforms taking the second spot with 9.7% of assets.
UPHOLDINGS Compound Kings ETF has accumulated $7.7 million in its asset base and charges 60 bps on an annual basis. It trades in a volume of 1,000 shares per day on average.