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Twitter Jumps Most in 8 Months on Q3 Results: ETFs to Tap

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To soothe the nerves of investors amid the tech sector’s October rout, Twitter’s shares went through of the roof courtesy of its upbeat earnings, released on Oct 25 before market opens. Shares surged 15.5% in the key trading session. Per the source, shares shot up the maximum in eight months.

The company reported third-quarter 2018 non-GAAP earnings per share of 21 cents, which came ahead of the Zacks Consensus Estimate of 14 cents and increased 110% year over year. Revenues of $758.1 million rose 28.6% from the year-ago quarter and comfortably surpassed the consensus mark of $704 million. Broadcasts of major sporting events helped its advertising revenues. Quarterly advertising revenues grew 29%.

 

Twitter’s daily active users (DAUs) rose 9% in the third quarter. The metric has been registering healthy year-over-year growth rates for eight quarters now. Management sounds hopeful about the prospect of growth in DAU rates.

Monthly active users (MAU) averaged 326.0 million (down 2% sequentially and down 1% year over year). This is a larger-than-expected falloff and its second consecutive quarterly decline. Since the continued decline in the metric is the result of the crackdown on spammy and suspicious accounts (as noted by Twitter), investors probably did not pay much attention to it. Twitter management forecast that MAU figure may decline again in the fourth quarter.

Market Impact

Signs of improvement in Twitter earnings scorecard boosted investor sentiment. Twitter currently has a Zacks Rank #1 (Strong Buy). It belongs to a top-ranked Zacks industry (top 15%) and Zacks sector (top 25%).

The stock is a good growth play with a Zacks Style Score of B, but lacks value quotient as indicated by the score of F. Overall, there is a high chance that the Twitter stock may perform well in the coming trading sessions, given its revival (see all technology ETFs here).

Impact on ETF World

Twitter’s results make it important for us to have a look at the social media ETF Global X Social Media ETF (SOCL - Free Report) . Twitter takes about 13.1% of SOCL, holding the top position. As a result, the company’s results are crucial to the entire social media sector (see all technology ETFs here).

The fund was up more than 4.1% on Oct 25 thanks to Twitter’s results and a market rebound. The product charges 65 bps in annual fees. SOCL has company-specific concentration risk, putting more than 60% investments in its top 10 holdings.

Investors should also note that Twitter shares occupy about 5.4% in ARK Innovation ETF (ARKK - Free Report) . The fund charges 75 bps in fees and was up about 4.7% on Oct 25.

The in-focus Twitter takes the third spot of the fund ARK Web x.0 ETF (ARKW - Free Report) with about 5.53% exposure. The fund charges 75 bps in fees. The social-media company takes about 4.22% of Invesco Dynamic Media ETF . Both funds were up 5% and 2.9% on Oct 25.

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