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6 ETFs to Ride On Amazon's Blowout Q1


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After the closing bell on Thursday, online e-commerce behemoth Amazon AMZN came up with amazing Q1 results, with a massive earnings beat of 168.03% powered by the fast-growing cloud computing business. The company also offered a rosy outlook for the second quarter, spreading huge optimism in Wall Street.

Q1 Results in Detail

The company reported earnings of $3.27 per share, trumping the Zacks Consensus Estimate of $1.22 and more than doubling from the year-ago earnings of $1.48. Revenues climbed 43% year over year to $51.04 billion and topped the estimate of $50.17 billion. In particular, revenues from the cloud computing business - Amazon Web Services (AWS) - surged 49% year over year to $5.4 billion (read: Tech ETFs to Buy After Massive Selloff ).

Amazon has more than 100 million Prime subscribers, leading many other subscription businesses, including Spotify (71 million users), Hulu (17 million) and Tinder (three million). However, HBO and Netflix have more subscribers around the world totaling 142 million and 125 million, respectively. The online retailer has raised the price of annual U.S. Prime membership to $119 from $99 starting May 11 for new members and June 16 for renewing members. It also extended its streaming partnership with the NFL until 2019, which would further add its subscription members and revenues.

For the second quarter of 2018, the company expects revenues to grow 34-42% to $51-$54 billion. The Zacks Consensus Estimate is pegged at $52.43 billion, which represents 38.14% growth. Operating income is expected in the range of $1.1-$1.9 billion.

Amazon currently has a Zacks Rank #1 (Strong Buy) and boasts a top Growth and Momentum Score of A each, suggesting that the stock is primed for future growth (read: ETFs to Turn Amazon's Pain Into Your Gain ).

Market Impact

The blockbuster results pushed shares of AMZN higher as much as more than 7% in aftermarket hours to new record highs. With the surge, Amazon is poised to become the second-largest valuable U.S. company with a market cap of about $780 billion, edging past Microsoft MSFT and indicating Amazon's dominant market position amid recurrent attacks from President Donald Trump (read: ETFs Face-Off as Amazon Races to Surpass Microsoft ).

Solid trading in the stock will definitely continue in the ETF world, especially for funds with a double-digit allocation to this Internet giant. Below we have highlighted some of these that would be in focus in the coming days and could see upside post AMZN results. These funds have a solid Zacks ETF Rank #1 (Strong Buy), 2 (Buy) or 3, suggesting continued upside:

Consumer Discretionary Select Sector SPDR Fund XLY

This product offers exposure to the broad consumer discretionary space by tracking the Consumer Discretionary Select Sector Index. It is the largest and most-popular product in this space with AUM of nearly $12.7 billion and average daily volume of around 5.8 million shares. Holding 82 securities in its basket, Amazon takes the top spot with 20.4% of assets. Internet & direct marketing retail dominates 30% of the portfolio while media, specialty retail, and hotels restaurants and leisure round off the next three spots with a double-digit allocation each. The fund charges 0.13% in expense ratio and has a Zacks ETF Rank #1 with a Medium risk outlook (read: ETFs to Benefit or Lose from Rising Yields ).

VanEck Vectors Retail ETF RTH

This fund provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index. Of these, AMZN takes the top position in the basket with a 19.3% share. The ETF has a certain tilt toward specialty retail, which accounts for 31% of the portfolio, while Internet direct marketing (23%), hypermarkets (14%), and departmental stores (11%) round off the next three spots. The product has amassed $67.6 million in its asset base and charges 35 bps in annual fees. Volume is light as it exchanges nearly 15,000 shares per day. RTH has a Zacks ETF Rank #3 with a Medium risk outlook.

iShares U.S. Consumer Services ETF IYC

This ETF provides targeted exposure to domestic consumer services' stocks by tracking the Dow Jones U.S. Consumer Services Index. It holds 161 stocks in its basket with Amazon being the top firm holding 17.3% share. In terms of industrial exposure, retailing makes up the largest share at 44.7%, followed by media (20.5%), consumer services (16.6%), and foods & staples retailing (11.8%). The fund has amassed $732.1 million in its asset base while trades in lower volumes of 34,000 shares a day on average. It charges 44 bps in annual fees from investors and has a Zacks ETF Rank #3 with a Medium risk outlook.

iShares Edge MSCI Multifactor Consumer Discretionary ETF CNDF

This ETF has attracted $3.2 million in its asset base and trades in a meager volume of under 1000 shares. It targets companies that have the potential to outperform the broad U.S. consumer discretionary sector and tracks the MSCI USA Consumer Discretionary Diversified Multiple-Factor Capped Index. Holding 43 stocks in its basket, Amazon is the top firm accounting for 17.1% of the portfolio. The fund is skewed toward retailing at 41.4% while consumer durables, consumer services and media round off the next three spots with a double-digit exposure each. CNDF charges 35 bps in fees per year and has a Zacks ETF Rank #2 (read: all the Consumer Discretionary ETFs here ).

Fidelity MSCI Consumer Discretionary Index ETF FDIS

This fund tracks the MSCI USA IMI Consumer Discretionary Index, holding 345 stocks in its basket. Of these, AMZN takes the top spot with 16.9% share. Internet & direct marketing retail makes up for the top sector with 22% share followed by specialty retail (16%) and movies & entertainment (9%). The product has amassed $469.8 million in its asset base while trades in a good volume of around 120,000 shares a day on average. It charges 8 bps in annual fees from investors and has a Zacks ETF Rank #3 with a Medium risk outlook.

Vanguard Consumer Discretionary ETF VCR

This fund follows the MSCI U.S. Investable Market Consumer Discretionary 25/50 Index and holds 368 stocks in its basket. Of these, Amazon occupies the top position with 16.8% allocation. Internet & direct marketing retail takes the largest share at 24.6% of assets, while movies & entertainment, restaurants and cable & satellite round off the top four sectors. VCR charges investors 10 bps in annual fees, while volume is moderate at nearly 95,000 shares a day. The product has managed about $2.6 billion in its asset base and has a Zacks ETF Rank #3 with a Medium risk outlook.

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Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Microsoft Corporation (MSFT): Free Stock Analysis Report

VANECK-RETAIL (RTH): ETF Research Reports

SPDR-CONS DISCR (XLY): ETF Research Reports

VIPERS-CONS DIS (VCR): ETF Research Reports

ISHRS-EMS MCD (CNDF): ETF Research Reports

FID-CON DIS (FDIS): ETF Research Reports

ISHARS-US CN CY (IYC): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , ETFs
Referenced Symbols: AMZN , MSFT , RTH , XLY , VCR



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