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Twitter Crashes Post Q2: Should You Sign Out of These ETFs?
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The last three months were pretty good for Twitter shares thanks to plenty of growth initiatives. But Twitter might fail to cling on to strong gains in the days ahead on a subdued Q2 earnings report. The micro-blogging site disappointed investors on July 26 with mixed-bag Q2 results after market close, and saw a freefall in its share price.
Like in Q1, this time too the company beat on the bottom line but missed on the top line. Also, a tapered Q3 guidance prompted investors to stay away from the Twitter stock.
Q2 in Detail
The company’s second-quarter 2016 loss per share (adjusted for stock-based compensation expense and other one-time items) of 11 cents came in narrower than the Zacks Consensus Estimate of 15 cents loss per share.
Revenues of $602 million in the quarter fell shy of the Zacks Consensus Estimate of $614 million. Revenues were up 20% from the year-ago period.
The company finished the quarter with an average 313 million monthly active users (MAU). This indicated growth of 1% quarter over quarter and about 3% year over year.
The blow came in the form of guidance as well. For the third quarter, Twitter anticipates total revenue between $590 million and $610 million, way below the Zacks Consensus Estimate which was pegged at $683 million prior to the release.
Market Impact
The soft guidance and a sales miss dampened investors’ mood as the stock saw a landslide, plunging over 10% after hours. However, in the last three months (as of July 26, 2016), the stock gained about 16.5% (see all technology ETFs here).
Investors should note that there were some bullish points in the Twitter earnings scorecard. For example, the company reported year-over-year and sequential growth this quarter in both monthly active and daily active usage.
Prudent implementation of growth initiatives including the proper execution of live-streaming video and enhancements to its periscope app may help the company to score better ahead. Plus, the industry that the company operates in is presently in the top 25% of the Zacks Industry Rank universe. So, investors having a strong stomach for risks can play this dip by investing in Twitter. Though the stock is definitely not a value play, it has a compelling growth score of ‘A’, at the time of writing.
However, many may view this as a risky task, and can thus opt for a basket or ETF approach. Notably, the ETF route will help investors to mitigate one company’s average or downbeat performance with stellar results of the other companies and lower company-specific concentration risks.
Twitter does not have a sizable exposure in the overall ETF world except for a handful of funds primarily into the social media and internet spaces having exposure to it. Below, we outline those funds which could be in focus in the days to come. We also note that the fate of these funds in the near term largely depends on the earning results of the entire social media pace, not just Twitter.
This fund is the pure play in the global social media space and has amassed about $67 million in its asset base. Twitter takes the second spot with about 9.97% exposure (read: 4 ETFs Riding on Microsoft-LinkedIn Merger News).
Sprott Buzz Social Media Insights ETF
As the name suggests, this new fund is also into the social media space. In-focus Twitter takes the sixth spot with 4.86% weight (read: Time to Buy These Tech ETFs?).
SPDR S&P Internet ETF
The fund looks to follow the investment results of the S&P Internet Select Industry Index. The 60-stock fund invests just 2.68% in Twitter, but the stock is the second-position holder in the fund.
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Twitter Crashes Post Q2: Should You Sign Out of These ETFs?
The last three months were pretty good for Twitter shares thanks to plenty of growth initiatives. But Twitter might fail to cling on to strong gains in the days ahead on a subdued Q2 earnings report. The micro-blogging site disappointed investors on July 26 with mixed-bag Q2 results after market close, and saw a freefall in its share price.
Like in Q1, this time too the company beat on the bottom line but missed on the top line. Also, a tapered Q3 guidance prompted investors to stay away from the Twitter stock.
Q2 in Detail
The company’s second-quarter 2016 loss per share (adjusted for stock-based compensation expense and other one-time items) of 11 cents came in narrower than the Zacks Consensus Estimate of 15 cents loss per share.
Revenues of $602 million in the quarter fell shy of the Zacks Consensus Estimate of $614 million. Revenues were up 20% from the year-ago period.
The company finished the quarter with an average 313 million monthly active users (MAU). This indicated growth of 1% quarter over quarter and about 3% year over year.
The blow came in the form of guidance as well. For the third quarter, Twitter anticipates total revenue between $590 million and $610 million, way below the Zacks Consensus Estimate which was pegged at $683 million prior to the release.
Market Impact
The soft guidance and a sales miss dampened investors’ mood as the stock saw a landslide, plunging over 10% after hours. However, in the last three months (as of July 26, 2016), the stock gained about 16.5% (see all technology ETFs here).
Investors should note that there were some bullish points in the Twitter earnings scorecard. For example, the company reported year-over-year and sequential growth this quarter in both monthly active and daily active usage.
Prudent implementation of growth initiatives including the proper execution of live-streaming video and enhancements to its periscope app may help the company to score better ahead. Plus, the industry that the company operates in is presently in the top 25% of the Zacks Industry Rank universe. So, investors having a strong stomach for risks can play this dip by investing in Twitter. Though the stock is definitely not a value play, it has a compelling growth score of ‘A’, at the time of writing.
However, many may view this as a risky task, and can thus opt for a basket or ETF approach. Notably, the ETF route will help investors to mitigate one company’s average or downbeat performance with stellar results of the other companies and lower company-specific concentration risks.
Twitter does not have a sizable exposure in the overall ETF world except for a handful of funds primarily into the social media and internet spaces having exposure to it. Below, we outline those funds which could be in focus in the days to come. We also note that the fate of these funds in the near term largely depends on the earning results of the entire social media pace, not just Twitter.
Global X Social Media Index ETF (SOCL - Free Report)
This fund is the pure play in the global social media space and has amassed about $67 million in its asset base. Twitter takes the second spot with about 9.97% exposure (read: 4 ETFs Riding on Microsoft-LinkedIn Merger News).
Sprott Buzz Social Media Insights ETF
As the name suggests, this new fund is also into the social media space. In-focus Twitter takes the sixth spot with 4.86% weight (read: Time to Buy These Tech ETFs?).
SPDR S&P Internet ETF
The fund looks to follow the investment results of the S&P Internet Select Industry Index. The 60-stock fund invests just 2.68% in Twitter, but the stock is the second-position holder in the fund.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>