ETFs in Focus as Revenue Growth Boosts Google Shares - ETF News And Commentary
Shares of Google Inc. (GOOGL), the world’s biggest Internet search engine, rose in extended market trading on Thursday after the company reported solid year-on-year gain in first-quarter revenue. However, both the adjusted first-quarter revenue and earnings per share (EPS) figures missed the Zacks Consensus Estimate. This marked a string of 6 straight quarters of missed bottom-line expectations for Google.
Strong growth in advertising revenues drove Google’s overall revenue in the first quarter. However, a stronger dollar had a negative impact on earnings results. According to the company’s CFO, currency headwinds dragged down the year-on-year growth rate in total revenue by about 5% (read: 3 Currency ETFs that Crumbled in Q1).
Q1 Earnings in Detail
The company reported first quarter EPS of $5.20 (accounting for traffic acquisition costs (TAC)), missing the Zacks Consensus Estimate of $5.38. Also, the EPS was below the year-ago figure of $5.33. Meanwhile, first quarter revenue (excluding TAC) of $13.91 billion also came in lower than the Zacks Consensus Estimate of $14.1 billion. However, adjusted revenue increased 14.1% from the year-ago quarter on the back of impressive growth in advertisement revenue. According to the report, total advertisement revenue surged 11% year over year to $15.51 billion.
While aggregate paid clicks were up 13% year over year, they slipped by a percentage point from Q4. Paid clicks on Google websites fell 3% from the previous quarter. Costs per click were down 7% in aggregate year over year, and 13% lower for Google sites (read: ETFs in Focus on Google Earnings Miss and Soaring Costs).
Meanwhile, surging operating expenses hurt Google’s earnings in the first quarter. Operating expenses increased nearly 20.8% year on year to $6.46 billion in the quarter.
Shares of the tech giant rose nearly 4% in extended trading on Thursday following the release of its first quarter 2015 earnings results (read: Winning ETF Picks For Q1 Earnings Season).
ETFs in Focus
Investors reacted favorably to Google’s strong growth in first quarter revenue. The spotlight will be on Google during the post-earnings period as well. In this scenario, we have highlighted three ETFs having a significant exposure to the company and may get a boost from further gains, if any, in Google’s shares.
First Trust Dow Jones Internet ETF (FDN)
This is one of the most popular and active ETFs in the broad tech space with an AUM of $2.75 billion and average daily volume of more than 312,000 shares. The fund holds a small basket of 42 stocks charging investors 57 basis points annually.
Google scores among the top 10 holdings having a total allocation of more than 9.5% (Class A and Class C). From a sector look, information technology accounts for about 69% of the portfolio while consumer discretionary makes up 25.2%. The product has gained 9.9% in the year-to-date frame and has a Zacks ETF Rank of #3 (Hold) with a High risk outlook (see all technology ETFs here).
iShares Dow Jones US Technology ETF (IYW)
IYW is also quite popular in the tech space with AUM of $2.85 billion while charging 43 bps in fees and expense. Moreover, the fund trades in good volumes of about 580,000 shares a day.
The product tracks the Dow Jones US Technology Index, giving investors exposure to a basket of 141 stocks. Google scores among the top 10 holdings having 8.6% allocation (Class A and Class C). IYW has gained 3.5% in the year-to-date frame and has a Zacks ETF Rank of #1 (Strong Buy) with a Medium risk outlook.
Technology Select Sector SPDR ETF (XLK)
This is the most popular and actively traded ETF in the broad tech space with an AUM of $12.68 billion and average daily volume of more than 8 million shares. This fund follows the S&P Technology Select Sector Index and holds about 74 securities in its basket. Out of these firms, Google Class A and Class C shares take the sixth and the seventh spots, having a combined allocation of roughly 8%.
Sector-wise, Technology Hardware Storage & Peripherals accounts for about 22.4% of the portfolio while Software and IT Services take the next two spots. The product has gained 3.4% in the year-to-date frame and has a Zacks ETF Rank of #2 (Buy) with a Medium risk outlook.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
FT-DJ INTRNT IX (FDN): ETF Research Reports
ISHARS-US TECH (IYW): ETF Research Reports
SPDR-TECH SELS (XLK): ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
