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Should You Buy FAANG ETFs Ahead of Q2 Earnings?

The FAANG stocks — Facebook FB, Amazon AMZN, Apple AAPL, Netflix NFLX and Alphabet GOOGL — have been outperforming the market this year thanks to the purely digital shift in consumer habits amid the COVID-19 pandemic. However, these stocks were the biggest laggards last week, making them compelling choices ahead of the quarterly results. 

Streaming giant Netflix NFLX, the first company in the FAANG group to report Q2 earnings, came up with disappointing results on Jul 21 . While the company beat revenue estimates and reported solid subscriber addition, it missed the earnings estimate and issued weak third-quarter subscriber guidance (read: ETFs to Watch as Netflix Drops on Weak Subscriber Outlook).

Facebook

Facebook is expected to release its earnings report on Jul 29 after market close. Our proven model predicts reasonable chances of beating estimates for Facebook this time around as it has a Zacks Rank #3 (Hold) and an Earnings ESP of +5.28%. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The social media giant has seen positive earnings estimate revision of a couple of cents for the to-be-reported quarter over the past 30 days. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The current Zacks Consensus Estimate for the yet-to-be reported quarter indicates earnings increase of 58.2% from the year-ago reported figure. Revenues are expected to increase 2.5%. However, Facebook delivered negative earnings surprise of 10.17%, on average, in the last four quarters. The stock has a VGM Score of A and belongs to a bottom-ranked Zacks industry (bottom 37%). Shares of FB were up 23.1% in the past three months.

Amazon

Amazon, slated to report on Jul 30 after market close, has a Zacks Rank #3 and an Earnings ESP of +40.45%. The stock saw solid earnings estimate revision of 12 cents over the past 30 days for the second quarter. However, the Zacks Consensus Estimate represents a substantial year-over-year decline of 66.5%.

Amazon’s earnings surprise history is impressive, with earnings surprise of 8.71% on average for the last four quarters. Additionally, the company is expected to report revenue growth of 28.24%. The stock has a top Momentum Score of A and falls under a top-ranked Zacks industry (top 44%). The online e-commerce behemoth has witnessed share price increase of 26.6% over the past three months (read: S&P 500 Turns Positive For 2020: 10 Top Stocks In ETF).

Apple

Apple has a Zacks Rank #3 and an Earnings ESP of +4.41%. The stock saw positive earnings estimate revision of a 3 cents over the past 30 days for the fiscal third quarter and its earnings surprise history is strong. It delivered earnings surprise of 10.61%, on average, over the past four quarters. Apple is expected to suffer substantial earnings decline of 8.72% from the year-ago quarter. Revenues are expected to fall 4.98% year over year. It has a Growth Score of B and belongs to a top-ranked Zacks industry (top 25%). The stock has rallied 30.8% over the past three months. Apple is set to report earnings on Jul 30.

Alphabet

Alphabet has a Zacks Rank #3 and an Earnings ESP of +0.32%. It saw solid earnings estimate revision of 19 cents over the past 30 days for the to-be-reported quarter but its earnings are expected to decline 40.7%. Additionally, the stock has a Momentum Score of B and falls under a bottom-ranked Zacks industry (bottom 37%). Its earnings surprise track over the past four quarters is good with the beat being 4.85%, on average. Revenues are expected to decrease 3.31% from the year-ago quarter. The Internet behemoth has gained 18.7% in the past three months. The company will report after the closing bell on Jul 30 (see: all the Technology ETFs here).

ETFs to Tap

Given this, investors may want to play these stocks with the help of ETFs. Below we have highlighted five ETFs having the largest exposure to FAANGs.

MicroSectors FANG+ ETN FNGS: This ETN accounts for 10% share in each of the FAANG stocks (read: ETFs to Surge as Tesla Turns to Profit, Secures S&P 500 Entry).

iShares North American Tech ETF IGM: This product accounts for about 27.5% in the FAANG group and has a Zacks ETF Rank #2 with a Medium risk outlook.

Invesco QQQ QQQ: This fund makes up for 30.4% share in FAANGs and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Expect Further Rally in Nasdaq-100 ETFs as Moderna Joins).

iShares Evolved U.S. Technology ETF IETC: This fund accounts for 29% share in FAANG stocks.

iShares Russell 1000 Growth ETF IWF: This ETF allocates a combined 24.2% share in FAANG stocks and has a Zacks ETF Rank #1 with a Medium risk outlook.

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

Apple Inc. (AAPL): Free Stock Analysis Report

Netflix, Inc. (NFLX): Free Stock Analysis Report

Invesco QQQ (QQQ): ETF Research Reports

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

Alphabet Inc. (GOOGL): Free Stock Analysis Report

iShares Expanded Tech Sector ETF (IGM): ETF Research Reports

iShares Russell 1000 Growth ETF (IWF): ETF Research Reports

iShares Evolved U.S. Technology ETF (IETC): 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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