ETFs

ETFs in Focus Post Solid Facebook Q1 Results

After the closing bell on Apr 28, Facebook FB delivered robust first-quarter 2021 results wherein it beat both earnings and revenue estimates.

Adjusted earnings per share came in at $3.30, well above the Zacks Consensus Estimate of $2.36 and up 93% from the year-ago earnings. Revenues increased 48% year over year to $26.2 billion and edged past the estimated $23.8 billion. Notably, advertising revenues spiked 46% year over year to $25.4 billion driven by a 30% year-over-year increase in the average price per ad and a 12% increase in the number of ads delivered.

Daily and monthly active users grew 8% and 10% year over year to 1.88 billion and 2.85 billion, respectively. The company stated that about 3.45 billion people use Facebook, WhatsApp, Instagram or Messenger (Family of services) each month, and about 2.72 billion people use at least one of the Family of services every day, on average (read: Tech ETFs Are Back in Momentum, Soar to All-Time High).

Management expects Q2 total revenue growth to remain stable or accelerate modestly from the first quarter while Q3 and Q4 revenue growth to significantly decelerate sequentially. Additionally, the social media giant expects increased ad targeting headwinds in 2021 from regulatory and platform changes, notably the recently launched iOS 14.5 update, which is expected to begin having an impact in the second quarter. Management expects advertising revenue growth to continue for the rest of the year driven by price.

Shares of Facebook rose more than 5% in aftermarket hours to near record highs. Currently, Facebook has a Zacks Rank #3 (Hold) and Growth Score of B. However, it belongs to a bottom-ranked Zacks industry (bottom 26%).

ETFs to Soar

Given this, investors seeking to bet on Facebook could consider ETFs having a larger allocation to the networking giant. We have highlighted six of them in detail below:

Communication Services Select Sector SPDR XLC

This ETF offers exposure to companies from telecommunication services, media, entertainment and interactive media & services and has accumulated $13.2 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 at 22%. About half of the portfolio is allocated to interactive media & services, while entertainment, and media round off the next two. The product charges 12 bps in annual fees and trades in an average daily volume of 4.3 million shares. It has a Zacks ETF Rank #2 (Buy).

Fidelity MSCI Communication Services Index ETF FCOM

This fund follows the MSCI USA IMI Communication Services 25/50 Index. It holds 103 stocks in its basket with Facebook occupying the top position at 16.5%. Interactive media & services takes the top spot at 46.4%, while entertainment, media and diversified telecommunication services round off the next three positions. The product has amassed $745.3 million in its asset base and trades in an average daily volume of 93,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Vanguard Communication Services ETF VOX

This fund also targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 113 stocks in its basket, Facebook takes the second spot with 16.5% share. Interactive media & services is the top sector, accounting for 46.8% of the portfolio, while movies & entertainment, cable & satellite, and integrated telecommunication services, round off the next three. VOX has AUM of $3.7 billion and trades in a good volume of 161,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook (read: ETFs to Win on Biden's Infrastructure Plan).

iShares Global Comm Services ETF IXP
 
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 4.5/22.5/45 Capped Index. It holds 68 stocks in its basket with Facebook taking the top spot at 13.6% share. Interactive media & services dominates the fund’s return at 49.8%, followed by integrated telecommunication services (17.1%). The fund has amassed $323.2 million in its asset base, while trading at an average daily volume of 14,000 shares. Expense ratio comes in at 0.46%. IXP has a Zacks ETF Rank #3 with a Medium risk outlook.

UPHOLDINGS Compound Kings ETF KNGS

This fund is actively managed and seeks long-term growth and income primarily by investing in compounders: companies with the potential to reinvest their own cash flow at above average rates of return. It holds 24 stocks in its basket with Facebook taking the second spot with 12.5% of assets. The ETF has accumulated $11.7 million in its asset base since its debut last December and charges 60 bps in annual basis.

Global X Social Media Index ETF SOCL

This fund provides investors access to social media companies around the world and has amassed $497.2 million in its asset base. It tracks the Solactive Social Media Total Return Index, holding 39 securities in the basket. Of these firms, Facebook takes the top spot, making up for 12.4% of assets. The ETF charges 0.65% in annual fees and sees moderate trading volumes of roughly 62,000 shares a day. The fund has a Zacks ETF Rank #3 with a High risk outlook (read: ETFs to Benefit as Snap Shares Surge on Stellar Q1 Earnings).

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Facebook, Inc. (FB): Free Stock Analysis Report
 
VIPERS-TELE SVC (VOX): ETF Research Reports
 
FID-TELECOM (FCOM): ETF Research Reports
 
GLBL-X SOCL MDA (SOCL): ETF Research Reports
 
ISHARS-GLB COMM (IXP): ETF Research Reports
 
SPDR-COMM SV SS (XLC): ETF Research Reports
 
UPH-CMPD KING (KNGS): ETF Research Reports
 
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