After the closing bell on Tuesday, Facebook reported mixed third-quarter 2018 results. The social media giant beat the Zacks Consensus Estimate for earnings but missed on revenues. User growth also slowed down during the quarter.

Q3 Results in Focus

Adjusted earnings per share came in at $1.76, crushing the Zacks Consensus Estimate of $1.46 and increasing 10.7% from year-ago earnings. Revenues soared 33% year over year to $13.73 billion and fell short of the estimated $13.80 billion (see: all the Technology ETFs here).

Notably, mobile advertising revenues accounted for 92% of total advertising revenues, up from 88% in the year-ago quarter. Both daily and monthly active users grew 9% and 10% year over year, respectively, to 1.49 billion and 2.27 billion. This represents slowing growth in both users from 11% seen in Q2.

The company estimates that more than 2.6 billion people use Facebook, WhatsApp, Instagram, or Messenger ("Family" of services) each month, and more than 2 billion people use at least one of the Family of services every day on average.

Though 2019 will be another year of significant investment, Chief Financial Officer David Wehner eased concerns over costs next year. He commented that quarterly earnings from the company suggest its business is holding up in the wake of scandals and privacy breaches. Facebook expects revenue growth to slow by a “mid-to-high single-digit percentage” in the fourth quarter compared with high single-digit percentage projected three months ago.

Market Impact

Following the results, shares of FB initially dropped as much as 4% in aftermarket hours but recovered fully later on to close at up 3.1%. The volatile trading might create a good opportunity for investors to tap Facebook. Currently, Facebook has a Zacks Rank #3 (Hold) and a solid Growth Score of B. It further belongs to a top-ranked Zacks industry (top 34%).

ETFs to Watch

Given this, ETFs having a larger allocation to the networking giant are in focus in the days ahead. We have highlighted six of them in detail below:

Communication Services Select Sector SPDR (XLC Quick QuoteXLC - Free Report)

This ETF offers exposure to the new communication services sector of the S&P 500 index and has accumulated $3.8 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 with 16.9% share. About 43% of the portfolio is allocated to interactive media & services while entertainment and media round off the next three. The product charges 13 bps in annual fees and trades in an average daily volume of 1.8 million shares. It has a Zacks ETF Rank #2 (Buy).

Vanguard Communication Services ETF (VOX Quick QuoteVOX - Free Report)

This fund also provides exposure to the new communication sector and currently tracks the MSCI US Investable Market Communication Services 25/50 Transition Index. Holding 79 stocks in its basket, Facebook takes the second spot with 13.7% share. Internet software & services is the top sector accounting for 37.9% of the portfolio, while integrated telecommunication services and cable & satellite round off the next two. VOX has AUM of $1.3 billion and trades in a good volume of 144,000 shares a day on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Big Tech Sector Shake-Up Put These Stocks and ETFs in Focus).

iShares Global Comm Services ETF (IXP Quick QuoteIXP - 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 Sector Index. It holds 66 stocks in its basket with Facebook taking the top spot at 10.5% share. Interactive media & services, integrated telecommunication services and movies & entertainment are the top three sectors with double-digit exposure each. The fund has amassed $269.9 million in its asset base while trades in an average daily volume of 54,000 shares. Expense ratio came in at 0.47%.

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

This is the pure play ETF in the global social media space and has amassed $131.7 million in its asset base. The ETF charges 0.65% in annual fees, and sees moderate trading volumes of roughly 48,000 shares a day. The product tracks the Solactive Social Media Total Return Index, holding 35 securities in the basket. Of these firms, Facebook takes the second spot, making up for 10.6% of assets. The fund has a Zacks ETF Rank #4 (Sell) with a High risk outlook (read: Forget Spooky Market, 4 Halloween ETF Treats for Investors).

First Trust Dow Jones Internet Index Fund (FDN Quick QuoteFDN - Free Report)

This is one of the most popular and liquid ETFs in the broad technology space, with AUM of $8.3 billion and average daily volume of around 709,000 shares. The fund follows the Dow Jones Internet Composite Index and holds 41 stocks in its basket. Expense ratio comes in at 0.53%. Facebook occupies the second position with 8.1% of assets. The product has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Invesco NASDAQ Internet ETF (PNQI Quick QuotePNQI - Free Report)

This fund follows the Nasdaq Internet Index, giving investors exposure to the broad Internet industry. It holds about 94 stocks in its basket with AUM of $554.3 million, while charging 60 bps in fees per year. The product trades in a lower volume of around 41,000 shares a day. Facebook takes the third spot with 7.9% allocation. In terms of industrial exposure, Interactive media & services, and Internet & direct marketing retail takes the largest share at 35.6% and 31.3%, respectively. PNQI has a Zacks ETF Rank #3 with a High risk outlook (read: Tech ETFs Tumble: Should You Buy the Dip?).

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