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Sign In to Social Media ETFs as Twitter Soars on Q2 Results

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Twitter’s (TWTR - Free Report) shares are on a tear courtesy of its upbeat earnings. On Jul 26, before the market opened, the company reported second-quarter 2019 non-GAAP earnings per share of $1.58, much higher than 17 cents reported in the year-ago quarter. Revenues increased 18% year over year to $841.4 million. On a constant-currency (cc) basis, revenues grew 20%. Twitter’s advertising revenues soared 21% from a year earlier, thanks to 29% growth in the United States.

Average monetizable daily active users (mDAU) were 139 million in the reported quarter compared with 122 million in the year-ago quarter and 134 million in the previous quarter. Average U.S. mDAU were 29 million compared with 26 million in the year-ago quarter and 28 million in the previous quarter. Moreover, average international mDAU was 110 million compared with 96 million in the year-ago quarter and 105 million in the previous quarter.

Market Impact

Signs of improvement in Twitter earnings scorecard boosted investor sentiment as the stock added about 9% in the key trading session.

The stock has a good Momentum Score of B, but lacks value quotient as indicated by a Value Score of D. Overall, there is a high chance that the Twitter stock may perform well in the coming trading sessions, given its strength in user growth (see all technology ETFs here).

How Will Social Media ETF React Ahead?

Twitter’s results make it important for us to have a look at the social media ETF Global X Social Media ETF SOCL. Twitter takes about 11.79% of SOCL, holding the top position. As a result, the company’s results are crucial to the entire social media sector. The fund gained about 1.8% on Jul 26.  

The product charges 65 bps in annual fees. SOCL has company-specific concentration risk, putting more than 60% investments in its top 10 holdings. At the current level, SOCL carries a Zacks ETF Rank #3 (Hold) with a High-risk outlook.

However, not only Twitter, the fund is also receiving a tailwind from Facebook FB), which reported robust results this reporting season, smashing our top and bottom-line estimates on its booming mobile advertising business (read: Facebook Q2 Beat Put These ETFs in Focus).

Investors should also note that Twitter shares occupy about 5.2% in Invesco Dynamic Media ETF PBS. The fund charges 63bps in fees and was up about 1% on Jul 26 (read: Tap Disney's Roaring Box Office Success With These ETFs).

The in-focus Twitter takes the first spot of the fund Invesco S&P 500 Equal Weight Communication Services ETF (EWCOwith about 4.71% exposure. The fund charges 40 bps in fees. The fund added 1.6% on Jul 26.

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