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ETFs to Tap on Alibaba's Revenue Growth in Q4

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Chinese e-commerce giant Alibaba Group (BABA - Free Report) reported fourth-quarter fiscal 2019 results before the opening bell on May 15, wherein it beat earnings and revenue expectations. The company bounced back strongly from the Q3 weakest revenue growth in nearly three years. The company beat quarterly revenue estimates for the first time in a year (read: ETFs & Stocks to Tap on Highest Retail Sales Gain in 1.5 Years).

Earnings of $1.28 per ADS beat the Zacks Consensus Estimate by 23 cents and were up 50% year over year. Revenues climbed 51% year over year to $13.93 billion and edged past the estimate of $13.51 billion. The robust results were driven by growth in its core e-commerce and cloud computing businesses. Core e-commerce revenues grew 54% year over year, cloud computing revenues soared 76%, and digital media and entertainment revenues increased 8%.

Annual active consumers increased 18 million from the last quarter to reach 654 million in March. Mobile monthly active users in its China retail marketplaces increased 22 million quarter over quarter to 721 million.

For fiscal 2020, Alibaba expects revenues to top 500 billion yuan, indicating growth of 33% from the year-ago quarter (see: all the Technology ETFs here).

Market Impact

Following the earnings beat, BABA shares climbed 1.6% on the day. Alibaba currently has a Zacks Rank #3 (Hold) and a VGM Score of C. It belongs to a bottom-ranked Zacks industry (bottom 35%).

Given this, ETFs having the highest allocation to the Chinese e-commerce giant will be in focus for the days ahead. Below, we have highlighted six ETFs in detail:

Invesco BLDRS Emerging Markets 50 ADR Index Fund (ADRE - Free Report)
The product offers exposure to 50 emerging market-based depositary receipts by tracking the BNY Mellon Emerging Markets 50 ADR Index. About 43.2% of the portfolio is allotted to Chinese firms with Alibaba occupying the top position at 19.1%. Brazil, Taiwan and India round off the next three spots in terms of country exposure. Consumer discretionary, financials, information technology and communication services are the top five sectors. ADRE has amassed $132.4 million in its asset base while trading in light volume of about 6,000 shares. It charges 18 bps in fees per year and gained 0.6% on the day. ADRE has a Zacks ETF Rank #3 with a Medium risk outlook.

ProShares Online Retail ETF (ONLN - Free Report)

This is the first ETF focused exclusively on retailers that principally sell online. It follows the ProShares Online Retail Index, holding 20 stocks in its basket. While American firms dominate the portfolio with three-fourth share, Chinese firms account for 22.6% with Alibaba taking the second spot and accounting for about 16.2% share. The product has amassed $22.2 million in its asset base while trading in a paltry volume of around 23,000 shares a day on average. It charges 58 bps in annual fees from investors and climbed 1.1% on the day (read: Buffett Finally Picks Amazon: Why to Do the Same With ETFs).

ProShares Long Online/Short Stores ETF (CLIX - Free Report)

This fund seeks to benefit from both outperforming online and underperforming physical retailers through the long/short strategy. It combines the 100% long position in retailers that primarily sell online or through other non-store channels with a 50% short position in those that rely principally on physical stores by tracking the performance of the ProShares Long Online/Short Stores Index. The approach reduces equity market exposure and results in less volatility than long-only equity strategies. With long positions in 20 stocks, Alibaba occupies the second spot with 16.2% allocation. The ETF charges 65 bps in annual fees from investors and trades in average daily volume of 7,000 shares. It has accumulated $48.8 million in its asset base and gained 1.3% on the day.

iShares MSCI China ETF (MCHI - Free Report)

This ETF targets Chinese stock market and follows the MSCI China Index. Holding 311 securities in its basket, Alibaba takes the second spot with 13.6% share. From a sector look, about 26.8% of the portfolio is allotted to communication while consumer discretionary (22.6%) and financials (21.9%) round off the next two spots. The fund has amassed $4.4 billion in its asset base while charging 59 bps in annual fees. Volume is also solid as it exchanges nearly 6.6 million shares on average daily basis. The ETF gained 0.9% following the results and has a Zacks ETF Rank #3 with a Medium risk outlook.

Invesco BLDRS Asia 50 ADR Index Fund (ADRA - Free Report)

This ETF follows the capitalization-weighted BNY Mellon Asia 50 ADR Index and tracks the performance of approximately 50 Asian market-based DRs. Chinese firms make up for the largest share at 35.7%, with Alibaba at the top position with 14.3% allocation. Japanese firms account for 31.4% of the assets. ADRA is often overlooked by investors as evident from its AUM of $18.3 million and average daily volume of about 1,000 shares. It charges 30 bps in annual fees and was flat on the day post BABA results. The fund has a Zacks ETF Rank #3 with a Medium risk outlook.

Franklin FTSE China ETF (FLCH - Free Report)

This product follows the FTSE China Capped Index, charging investors 19 bps in annual points. It holds 274 stocks in its basket with Alibaba taking the second spot at 13.6%. Communication services, financials and consumer discretionary are the top three sectors with more than 22% allocation each. The ETF has amassed $41.2 million in its asset base and sees average daily volume of 11,000 shares. It has risen 0.8% following Alibaba results and has a Zacks ETF Rank #3 (read: ETF Winners & Losers As China Retaliates).

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