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4 ETFs to Watch on PayPal Addition to Nasdaq-100

Zacks Equity Research

The digital payment company PayPal (PYPL) has been reaching one milestone after another since it parted ways with its parent eBay Inc. (EBAY). First, PayPal’s market cap surpassed that of eBay, then it delivered an earnings surprise of 8.33% in its debut quarterly results and now the technology platform company is entering the Nasdaq-100 index effective November 11, 2015, replacing Broadcom Corp. (BRCM). PYPL was up about 2.5% on the news.

PayPal has a strong growth story in the fast expanding digital payments industry. Its foray into mobile payments with the Braintree acquisition and its One Touch system corroborates the fact.

 In fact, PayPal recently acquired Xoom Corporation, a service for international money transfers which will strengthen the its services into the overseas money transfer market. In the third quarter, PayPal’s total payment volume (TPV) expanded faster than the rate of global e-commerce, per management.


Though there’s room for improvement, as the company’s revenues of $2.258 billion fell short of the estimate of $2.264 billion in Q3, nobody can ignore PayPal’s underlying strong momentum. Notably, the Zacks Industry Rank the company operates in presently is in the top 28% section of the Zacks industry universe. The stock has a Momentum score of ‘A’ and a Growth score of ‘B’. This is probably the reason, the Nasdaq-100 index has acknowledged this high growth stock.


In any case, tech-heavy Nasdaq-100 has been hitting highs lately on the tech earnings bounce. It is a market-cap weighted index and the addition of PYPL will do more good to it. PYPL is currently trading around $37.90 and has a Zacks Rank #3 (Hold). While investing in the PayPal stock is definitely an option to play the potential boom, an ETF route also offers investors a less risky and diversified approach (read: ETFs to Ride on PayPal Growth Story).

PowerShares QQQ ETF (QQQ)


QQQ provides exposure to the 109 largest domestic and international non-financial companies listed on the Nasdaq. The fund has a definite tilt toward large caps with a large concentration on the top firm – Apple (AAPL) – at 12.85%. While information technology dominates the fund’s portfolio with 55.6% share, consumer discretionary and healthcare account for a double-digit exposure each.


The fund has amassed about $36.9 billion in assets. The product charges investors 20 basis points in fees. The fund is up 11.4% so far this year (as of November 3, 2015) (see: all the Technology ETFs here).


First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)


QQEW looks to replicate the performance of the NASDAQ-100 Equal Weighted index. This benchmark index provides exposure mostly to the largest domestic, and to some extent, international companies holding each stock in an equal-weighted fashion. An equal-weighted approach also alleviates some company-specific concentration risk from the ETF.


The fund invests $564.5 million of assets in 109 stocks. No stock accounts for more than 1.38% of the basket. The fund appears heavily invested in the Technology sector with about 38.3% of investment, followed by about 29% in Consumer Services and 13.2% in Health Care.


The fund charges 74 bps in annual fees. QQEW has returned 3.6% year to date. The fund presently carries a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.


Direxion NASDAQ-100 Equal Weighted Index Shares ETF (QQQE)


The fund also provides exposure to the NASDAQ-100 Equal Weighted TR Index.  QQQE charges 35 basis points as fees and manages an asset base of $85.6 million. No stock accounts for more than 1% of the fund. The fund is up 3.8% so far this year and has a Zacks ETF Rank #3 with a Medium risk outlook.


Purefunds ISE Mobile Payments ETF (IPAY)

This newly launched ETF tracks the ISE Mobile Payments Index to provide exposure to the performance of companies engaged in the mobile/electronic payments business. This approach results in the fund holding a small basket of 31 stocks.

Infrastructure and Software dominates the fund with about  30% exposure, followed by Processors and Cable Networks, each with double-digit allocation of about 26.4% and 23.6%, respectively (read: Play Mobile Payments & Big Data with 2 New ETFs).

As far as geographical concentration is concerned, the fund is heavy on the U.S. with about 85% focus followed by France (4.32%) and Germany (3.83%). The fund charges 75 bps in fees and has amassed about $5 million in assets, having debuted in mid July. The fund is up 1.7% so far this year.

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PAYPAL HOLDINGS (PYPL): Free Stock Analysis Report
NASDAQ-100 SHRS (QQQ): ETF Research Reports
FIRST N-100 EQW (QQEW): ETF Research Reports
DIR-NDQ100 EWIS (QQQE): ETF Research Reports
PF ISE MOBLPAY (IPAY): ETF Research Reports
BROADCOM CORP-A (BRCM): Free Stock Analysis Report
EBAY INC (EBAY): Free Stock Analysis Report
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