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Alibaba Soars on Solid Revenue Outlook: 6 ETFs to Tap

Sweta Killa

Chinese e-commerce giant Alibaba Group BABA lifted investors’ sentiment on Thursday after it offered upbeat revenue guidance for fiscal 2018 at its investor day in Hangzhou. It expects an explosive revenue growth of 45–49% in the current fiscal year, or revenues of around $34.3 billion, far above analysts’ estimates.

The Zacks Consensus Estimate calls for 30.9% growth in revenue while Bloomberg estimates revenue growth of 35% (read: Will Alibaba's Earnings Dull the Shine of These ETFs?).

The company remained bullish on the revenue growth given its solid expansion in e-commerce, cloud computing, and strong media and entertainment businesses. Though Alibaba is a dominant e-commerce player in China, AliCloud — its cloud computing business — and its digital payment arm Alipay are expected to be the biggest revenue growth drivers.  

Market Impact

The news has sent BABA shares soaring as much as 14.4% to a record high of $143.70 on the day. This represents the biggest one-day gain since the Chinese online giant went public in September 2014. Meanwhile, the stock crushed its average daily volume, as nearly 81.4 million shares moved hands compared with just 10.4 million on average. This suggests smooth trading for the stock in the days ahead.

The stock has returned 60.2% in the year-to-date timeframe, crushing the Zacks Categorized Electronic Commerce Market’s gains of 38.1%.    



Currently, Alibaba has a Zacks Rank #3 (Hold) with a VGM Style Score of D and boasts a solid Industry Rank in the top 22%, indicating room for upside in the near term (see: all the Technology ETFs here).

Given this, investors could easily play the upcoming growth in a basket form through ETFs. We have highlighted six ETFs having the double-digit allocation to this Chinese e-commerce giant that will be in focus in the days ahead.

BLDRS Emerging Markets 50 ADR Index Fund ADRE
 
The product offers exposure to the 50 emerging market-based depositary receipts by tracking the BNY Mellon Emerging Markets 50 ADR Index. About 41.2% of the portfolio is allotted to Chinese firms with Alibaba occupying the top position at 13%. Brazil, Taiwan and India round off the next three spots in terms of country exposure. From a sector look, information technology accounts for 38.7%, followed by financials (17.1%), telecom services (13.7%) and energy (8.7%). ADRE has amassed $138.6 million in its asset base while trades in a light volume of about 9,000 shares. It charges 30 bps in fees per year and gained 2.4% on the day. ADRE has a Zacks ETF Rank of 3 with a Medium risk outlook.

Guggenheim BRIC ETF EEB

This product provides exposure to BRIC countries and follows the BNY Mellon BRIC Select DR Index. In total, it holds 107 stocks with Alibaba at the top position, accounting for 11.9% of assets. About one-fourth of the portfolio is dominated by information technology while energy and financials round off the next two spots with a double-digit exposure each. The ETF has $80.4 million in AUM and sees paltry volume of around 13,000 shares. Expense ratio comes in at 0.64%. The fund added 1.8% on the day and has a Zacks ETF Rank of 3 with a Medium risk outlook.

iShares MSCI China ETF MCHI

This ETF follows the MSCI China Index, holding 152 securities in its basket. Out of these, Alibaba takes the second spot at 10.8% share. From a sector look, about one-third of the portfolio is allotted to information technology while financials and consumer discretionary round off the next two spots with double-digit exposure each. The fund has amassed $2.4 billion in its asset base while charging 61 bps in annual fees. Volume is also solid as it exchanges more than 1.3 million shares in hand on an average daily basis. The ETF was up 1.8% following the news and has a Zacks ETF Rank of 3 with a Medium risk outlook (read: China's Caixin Services PMI Surges in May: ETFs in Focus).

First Trust International IPO ETF FPXI

This product provides exposure to the largest and most liquid companies that are domiciled outside the U.S. by tracking the IPOX International Index. Holding 50 stocks in its basket, Alibaba occupies the top position with 10.62% allocation. About one-third of the portfolio is skewed toward Chinese firms while Japanese firms account for 20.2% share in the basket. From a sector look, financials takes the largest share at 36%, closely followed by consumer discretionary, information technology and industrials with double-digit exposure each. The product has been able to manage $1.6 million in its asset base and charges 70 bps in fees per year. Volume is light, exchanging about 6,000 shares in hand on average. It gained 1.1% following the news and has a Zacks ETF Rank of 3 with a Medium risk outlook.

Guggenheim China Technology ETF CQQQ

This fund targets the overall technology sector in China and follows the AlphaShares China Technology Index. Holding 73 stocks, Alibaba occupies the second position in the basket with 10.7% share. In terms of industrial exposure, about 48.6% of the portfolio is allotted to Internet software & services while electronic components, semiconductors, electronic manufacturing services and technology hardware & storage round off the top four. The product manages an asset base of $94.9 million while trades in a small volume of around 19,000 shares a day. Expense ratio comes in at 0.70%. CQQQ surged 2.1% on the day, following Alibaba results and has a Zacks ETF Rank of 2 or ‘Strong Buy’ rating with a High risk outlook (read: 3 Niche ETFs That Have Surged to #1 Rank This Summer).

KraneShares CSI China Internet Fund KWEB

This product provides a concentrated exposure to the Chinese Internet market by tracking the CSI China Overseas Internet Index. In total, the fund holds 35 securities in its basket with Alibaba occupying the second spot at 10.6%. The technology sector makes up for a substantial 60% of total assets, while consumer discretionary takes the remainder with just 2.5% allotted to industrials. The ETF has amassed $485 million in its asset base and charges 72 bps in annual fees from investors. Volume is good as it exchanges more than 165,000 shares in hand per day. KWEB added 1% in the last trading session and currently has a Zacks ETF Rank of 3 with a High risk outlook.
 

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