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Sign In to Social Media ETFs as Twitter Rallies on User Growth

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The social media space is celebrating Twitter Inc.’s (TWTR - Free Report) highest quarterly user growth ever in fourth-quarter 2019. The short-messaging service company otherwise reported a mixed quarter on Feb 6, before market open. The stock jumped about 15% on the day.

Non-GAAP earnings of 25 cents per share missed the Zacks Consensus Estimate by 10.7% and declined 19.4% year over year. Revenues grew 10.8% year over year to $1 billion, which beat the Zacks Consensus Estimate by 0.4%.

User Details

Twitter recorded the fastest quarterly growth (21%) in monetizable daily active users (mDAU), with the metric touching the highest level. “This is only the third time Twitter has reported mDAUs alone, rather the industry standard monthly active users (MAUs) it previously reported,” per CNBC.

Average mDAU were 152 million in the reported quarter compared with 126 million in the year-ago quarter and 145 million in the previous quarter. Average U.S. mDAU totaled 31 million compared with 27 million in the year-ago quarter and 30 million in the preceding quarter.

Moreover, average international mDAU grossed 121 million compared with 99 million in the year-ago quarter and 115 million in the previous quarter. The company’s success in providing relevant content to people’s Home timelines and notifications contributed to mDAU growth.

What Lies Ahead?

The stock belongs to a favorable Zacks industry (placed at the top 43% of 250+ industries). The company has been putting in a lot of restructuring effort.

The company’s long-term prospects look positive despite earnings pressure. If an investor finds it too risky to bet on Twitter now, the ETF route can be followed as the basket approach lowers company-specific concertation risks.

ETFs in Focus

Twitter’s results will likely have a considerable impact on Global X Social Media ETF (SOCL - Free Report) . The company takes about 8.44% of SOCL, holding the third position. As a result, the company’s performance is crucial to the entire social media sector.

The product charges 65 bps in annual fees. SOCL has company-specific concentration risks, 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. The fund gained 2.8% on Feb 6 (read: Facebook Tumbles Post Q4 Results: What's in Store for ETFs?)

Apart from the social media ETF, Twitter has heavy exposure (about 10%) to the index of MicroSectors FANG+ ETN (FNGS - Free Report) . The product gained 2.3% on Feb 6. Yet another ETF that will be influenced by Twitter’s earnings is Invesco Dynamic Media ETF (PBS - Free Report) . Twitter takes about 5.03% of the fund, which gained about 1.9% on Feb 6 (read: Has the Correction in Tesla ETFs Begun?).

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