Markets

Internet ETFs to Keep Rising Amid Worsening Coronavirus Crisis

The coronavirus outbreak seems to be getting severe in the United States as it has again set a new daily record of 77,255 new cases on Jul 16. Per a CNN report, at least 39 U.S. states are seeing rising new cases from the prior week with hospitals in California, Florida, Arizona and Texas reportedly facing scarcity of beds.

In fact, a closely-observed model is now predicting 224,000 deaths related to coronavirus in the United States by Nov 1, which is 16,000 more deaths than the prediction made last week, per a CNN report. In order to fight the rising number of cases, states like California, Texas, Florida, Los Angeles, San Diego and Oregon along with others have halted or rolled back the reopening process, per a CNN report. California, for instance, is closing down all indoor restaurants, wineries, movie theaters, zoos, museums and bars.

The second half of 2020 is expected to keep facing the brunt of the pandemic as the second wave of the outbreak is gathering steam.In the current scenario, the rising work-from-home and online shopping trend, increasing digital payments, growing video streaming and soaring video game sales are slowly becoming the “new normal.” With the new trends making way, Internet will continue to be a major requirement in daily lives.

Evidently, cloud computing has emerged as a key technology in the fight against coronavirus. It is supporting organizations in remotely processing a lot of information, developing and running key applications and services, and helping employees across the world collaborate while working. The work-from-home model has bumped up sales of PCs, laptops and other kind of computer peripherals.

More and more people are spending time at home, in line with social-distancing guidelines due to the pandemic woes. As a result, they are resorting to streaming platforms like Netflix (NFLX), Amazon Prime or Disney+ (DIS) or turning to social media platforms like Facebook (FB) and Twitter (TWTR) for in-house entertainment.

It is also observed that the coronavirus-induced lockdown boosted demand for video games. Per the NPD Group report, the U.S. video game industry witnessed record sales across hardware, software, accessories and game cards, totaling $977 million (up 52% year over year) in May (highest since May 2008) after gaining around 73% year over year in April.

Strikingly, even as the rebooting of the U.S. economy happens in phases and social-distancing restrictions are being eased, people are increasingly opting for contactless operations. It’s largely because the pandemic brought about some changes in lifestyle and influenced Americans’ preferences. Most of the surveys have found that people are more interested in online shopping rather than visiting a brick-and-mortar store for their purchases of essential food items and supplies now. In fact, per eMarketer’s latest forecast, e-commerce sales are expected to grow 18% in 2020 to reach $709.78 billion, representing 14.5% of total U.S. retail sales this year.

Looking back, the first-quarter 2020 numbers show shoppers’ inclination toward online shopping. According to U.S. Department of Commerce data, consumers made around $146.47-billion online purchases with U.S. retailers, up 14.5% year over year (per a Digital Commerce 360 article). Going by the same article, online purchases accounted for around 16.2% of total retail sales for the quarter, increasing 15.0% year over year.

Internet ETFs to Continue Gaining

Against this backdrop, let’s look at some Internet ETFs that will continue to gain from increasing demand for online gaming, shopping, video streaming and work-from-home trends due to the coronavirus crisis:

First Trust Dow Jones InternetIndex FDN — up 27.3% year to date

The fund seeks investment results that correspond generally to the price and yield of the Dow Jones Internet Composite Index. It has amassed $9.56 billion in assets and charges 52 basis points (bps) in expense ratio. The fund has a Zacks Rank #2 (Buy) with a High-risk outlook (read: 5 ETF Areas Hitting Highs on Resurging Coronavirus Cases).

ARK Next Generation Internet ETF ARKW — up 62.7%

It is an actively-managed ETF that seeks long-term growth of capital by investing under normal circumstances primarily (at least 80% of its assets) in domestic and U.S. exchange traded foreign equity securities of companies that are relevant to the fund’s investment theme of next-generation Internet. The fund has AUM of $1.78 billion with an expense ratio of 76 bps. It has a Medium-risk outlook (read: Can Top ETFs of Q2 Continue to Rally in Q3?).

Invesco NASDAQ Internet ETF PNQI — up 31.7%

It is based on the NASDAQ Internet Index. The fund will normally invest at least 90% of its total assets securities that comprise the index. The index is designed to track the performance of the largest and most liquid US-listed companies engaged in Internet-related businesses and that are listed on one of the major U.S. stock exchanges. It has amassed $743.9 million in assets and charges 62 bps in expense ratio. The fund has a Zacks Rank #2 with a High-risk outlook (read: ETF Areas for July as Second Wave of Coronavirus Hits Hard).

O’Shares Global Internet Giants ETF OGIG — up 49.4%

The fund is a rules-based ETF designed to provide investors with the means to invest in some of the largest global companies that derive most of their revenues from the Internet and e-commerce sectors that exhibit quality and growth potential. The fund has AUM of $343.3 million with an expense ratio of 48 bps (read: 4 ETF Investing Styles for Q3).

Global X Internet of Things ETF SNSR — up 7.7%

The fund seeks to invest in companies that stand to potentially benefit from the broader adoption of the Internet of Things (IoT), as enabled by technologies such as WiFi, 5G telecommunications infrastructure, and fiber optics. This includes the development and manufacturing of semiconductors and sensors, integrated products and solutions, and applications serving smart grids, smart homes, connected cars, and the industrial Internet. It has amassed $206.8 million in assets and charges 68 bps in expense ratio.

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Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports

ARK Next Generation Internet ETF (ARKW): ETF Research Reports

Global X Internet of Things ETF (SNSR): ETF Research Reports

First Trust Dow Jones Internet ETF (FDN): ETF Research Reports

OShares Global Internet Giants ETF (OGIG): 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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