Markets

Facebook Q2 Earnings Beat Estimates: ETFs Set to Soar

After the closing bell on Jul 30, Facebook FB delivered robust second-quarter 2020 results wherein it beat both earnings and revenue estimates. Shares of Facebook soared as much as 8% in aftermarket hours on elevated volumes.

Adjusted earnings per share came in at $1.80, well above the Zacks Consensus Estimate of $1.44 and double the year-ago earnings. Revenues increased 11% year over year to $18.69 billion and edged past the estimated $17.29 billion. Notably, advertising revenues spiked 10% year over year to $18.32 billion. Better-than-expected results came form the stay-at-home trends that propelled the demand for e-commerce (read: Internet ETFs to Keep Rising Amid Worsening Coronavirus Crisis).

Daily and monthly active users grew 11% and 10% year over year, respectively, to 1.73 billion and 2.60 billion. The company estimates that about 2.99 billion people use Facebook, WhatsApp, Instagram or Messenger (Family of services) each month, and about 2.36 billion people use at least one of the Family of services every day, on average.

The social media giant expects daily and monthly active users to be flat or slightly down in most regions in the third quarter of 2020 from the second quarter as shelter-in-place restrictions continue to ease.

Impressed with the quarterly results, many analysts raised the price target on the stock, spreading strong optimism in the company’s growth prospect. Currently, Facebook has a Zacks Rank #3 (Hold) and a Growth Score of B. It belongs to a top-ranked Zacks industry (top 45%).

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 the communication services sector of the S&P 500 Index and has accumulated $10 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 21.2%. About 48% of the portfolio is allocated to interactive media & services, while entertainment, media, and diversified telecommunication services round off the next three. The product charges 13 bps in annual fees and trades in average daily volume of 3.4 million shares. It has a Zacks ETF Rank #1 (Strong Buy) (read: Back-to-School 2020: Another Driver of Tech ETF Rally).

Fidelity MSCI Communication Services Index ETF FCOM

This fund follows the MSCI USA IMI Communication Services 25/50 Index. It holds 100 stocks in its basket with Facebook occupying the top position at 16.2%. Interactive media & services takes the top spot at nearly 45.3%, while media, entertainment, and diversified telecommunication services round off the next three positions. The product has amassed $569.3 million in its asset base and trades in average daily volume of 148,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #2 (Buy) 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 115 stocks in its basket, Facebook takes the second spot with 16.7% share. Interactive media & services is the top sector, accounting for 46.3% of the portfolio, while movies & entertainment, cable & satellite, and integrated telecommunication services, round off the next three. VOX has AUM of $2.6 billion and trades in a good volume of 233,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.

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 670 stocks in its basket with Facebook taking the top spot at 13.3% share. Interactive media & services dominate the fund’s return at 46.3%, while integrated telecommunication services, wireless telecommunication services, and movies & entertainment round off the next three spots with double-digit exposure each. The fund has amassed $310.1 million in its asset base, while trading in average daily volume of 22,000 shares. Expense ratio comes in at 0.46%. IXP has a Zacks ETF Rank #3 with a Medium risk outlook.

Global X Social Media Index ETF SOCL

This fund provides investors access to social media companies around the world and has amassed $174.9 million in its asset base. It tracks the Solactive Social Media Total Return Index, holding 40 securities in the basket. Of these firms, Facebook takes the second spot, making up for 9.2% of assets. The ETF charges 0.65% in annual fees and sees moderate trading volumes of roughly 46,000 shares a day. The fund has a Zacks ETF Rank #3 with a High risk outlook (read: ETFs to Ride the Wave of 3 Key Coronavirus-Led Trends in 2H20).

MicroSectors FANG+ ETN FNGS

This ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar weighted index, designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion, with the Facebook share coming in at 10%. The product has accumulated $48.7 million in its asset base and charges 58 bps in annual fees. It trades in a meager volume of 9,000 shares a day, on average.

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Facebook, Inc. (FB): Free Stock Analysis Report

Vanguard Communication Services ETF (VOX): ETF Research Reports

Fidelity MSCI Communication Services Index ETF (FCOM): ETF Research Reports

Global X Social Media ETF (SOCL): ETF Research Reports

iShares Global Comm Services ETF (IXP): ETF Research Reports

Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports

MICRSFANG (FNGS): 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.

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