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How Is Q3 Earnings Season Going for Social Media ETFs?

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The social media space is on a tear lately with Global X Social Media Index ETF SOCL having returned about 19.5% in the year-to-date frame (as of October 27, 2016) (read: Top Sector ETFs of Summer).

However, the fund lost about 6.8% in the last one month. Twitter Inc.’s TWTR 24% crash in the last one month could be responsible for the lackluster performance of the fund. This makes it more important to take a look at how the space has been behaving in this earnings reporting cycle and understand the likely pricing trend, going forward.

In this regard, we discuss Twitter and LinkedIn earnings in detail.

On October 27, before the bell, Twitter’s adjusted loss per share of $0.10 came in narrower than the Zacks Consensus Estimate of loss of $0.15 per share. Also, revenues of $615.9 easily surpassed the Zacks Consensus Estimate of $611 million.

The micro-blogging site is planning to slash 9% of its workforce globally, resulting in over $10 million to $20 million of cash expenditure and another $5 million to $10 million of non-cash expenditure. Also, the company indicated that it will dispense its Vine app “in the coming months.”

These steps could be part of the company’s turnaround strategy. In fact, talks were rife last month that Twitter will be vended by the end of this year, though the dust settled down soon. On a year-over-year basis, revenues increased 8.2% marking its lowest expansion since Q1 of 2014 (read: Twitter Acquisition Talks in the Air: Stock & ETFs Gain).

However, Twitter recorded 317 million monthly active users (MAU) in Q3, up from 313 million in Q2 as well as analysts’ expectation of 315 million. Twitter churned out nearly 40% of its revenues from international markets which grew 21% year over year, while U.S. revenue growth was dismal at 1%. The stock gained over 0.6% in the key trading session and was up just 0.06% after hours.

On the same day, LinkedIn Corporation reported its last earnings before merging with Microsoft after market close. Total revenue grew 23% year over year to $960 million, beating the Zacks Consensus Estimate of $956 million. The company’s non-GAAP earnings per share excluding stock-based compensation expenses were $1.18 versus $0.78 recorded in the year-ago period. The shares were up about 0.2% after hours.

Market Impact

Investors should note that though LinkedIn does not have widespread exposure in the ETF world, Twitter offers relatively greater coverage. However, both companies have heavy exposure to SOCL. Below we highlight three ETFs that should be in focus following the earnings releases of Twitter and LinkedIn.

SOCL in Focus

This fund is the pure play in the global social media space. Twitter takes the fourth spot with about 8.52% exposure. Linkedin takes about 8.9% of the fund (read: 5 Millennial Friendly ETF Investing Ideas).

Sprott Buzz Social Media Insights ETF BUZ

As the name suggests, this new fund is also into the social media space. In-focus Twitter takes the third spot with 3.08% weight (read: Time to Buy These Tech ETFs?).

SPDR S&P Internet ETF XWEB

The fund looks to follow the investment results of the S&P Internet Select Industry Index. It invests just 2.01% in Twitter.

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