Amazon Q2 Earnings Disappoint: ETFs in Focus

After the closing bell on Thursday, Amazon AMZN posted dismal results for Q2. The e-commerce giant missed revenue estimates for the first time in three quarters and offered weak third-quarter guidance though it beat on the bottom line.

Earnings per share came in at $15.12, easily surpassing the Zacks Consensus Estimate of $12.22 and improving from the year-ago earnings of $10.30. Revenues climbed 27% year over year to $113 billion but fell short of the consensus estimate of $115.1 billion. The company topped $100 billion in revenues for the third consecutive quarter but sales growth slowed from 41% growth reported in the year-ago quarter.

In particular, revenues from the cloud computing business — Amazon Web Services (AWS) — surged 37% year over year to $14.8 billion. This growth rate is higher than 32% growth reported in Q1 and 29% growth seen in Q2 of 2020.

Amazon expects sales growth to continue slowing in Q3. The e-commerce giant offered a downbeat revenue guidance of $106-$112 billion for the third quarter, suggesting 10-16% year-over-year growth. The high end of the range is well below the current Zacks Consensus Estimate of $119.25 billion, which indicates 24% growth.

Market Impact

Following the disappointing results, AMZN shares dropped more than 7% in aftermarket hours on elevated volume. The stock currently has a Zacks Rank #3 (Hold) and Growth Score of A, suggesting that Amazon is primed for growth (see: all the Consumer Discretionary ETFs here).

Given this, ETFs with the highest allocation to this Internet giant will be in focus in the days ahead. Below we have highlighted five of them:

ProShares Online Retail ETF ONLN

This is the first ETF focused exclusively on retailers that principally sell online or through other non-store channels. It follows the ProShares Online Retail Index, holding 25 stocks in its basket. Amazon is the top firm accounting for 24.1% of the portfolio. The product has amassed $1 billion in its asset base and currently trades in a moderate volume of around 78,000 shares a day on average. It charges 58 bps in annual fees from investors.

Fidelity MSCI Consumer Discretionary Index ETF FDIS

This fund tracks the MSCI USA IMI Consumer Discretionary Index, holding 301 stocks in its basket. Of these, AMZN takes the top spot with 22.7% share. Internet & direct marketing retail makes up for the top sector with 26.6% share followed by specialty retail (20.3%), and hotels, restaurants & leisure (17.1%). The product has amassed $1.7 billion in its asset base while trading in a good volume of around 111,000 shares a day on average. It charges 8 bps in annual fees from investors and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: ETFs to Win on Strong US Consumer Confidence Levels in July).

Consumer Discretionary Select Sector SPDR Fund XLY

This product offers exposure to the broad consumer discretionary space by tracking the Consumer Discretionary Select Sector Index. It is the largest and most-popular product in this space, with AUM of nearly $20 billion and an average daily volume of around 3.7 million shares. Holding 63 securities in its basket, Amazon takes the top spot with 23.7% of assets. Internet & direct marketing retail dominates about 25.6% of the portfolio, while specialty retail, hotels restaurants, and leisure and automobiles round off the next two spots with a double-digit allocation each. The fund charges 0.12% in expense ratio and has a Zacks ETF Rank #2 with a Medium risk outlook.

Vanguard Consumer Discretionary ETF VCR

This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index and holds 297 stocks in its basket. Of these, Amazon occupies the top position with 22.7% allocation. Internet & direct marketing retail takes the largest share at 26.8% while automobile manufacturers, restaurants and home improvement retail and round off the next two spots. VCR charges investors 10 bps in annual fees, while volume is moderate at nearly 77,000 shares a day. The product has managed about $6.7 billion in its asset base and carries a Zacks ETF Rank #2 with a Medium risk outlook.

VanEck Vectors Retail ETF RTH

This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. Of these, AMZN takes the top position in the basket with 20.3% share. The product has amassed $283.6 million in its asset base and charges 35 bps in annual fees. Volume is light as it exchanges nearly 39,000 shares per day. RTH has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Here's Why Retail ETFs Are Good Picks Right Now).

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
VanEck Vectors Retail ETF (RTH): ETF Research Reports
 
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
 
Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports
 
Fidelity MSCI Consumer Discretionary Index ETF (FDIS): ETF Research Reports
 
ProShares Online Retail ETF (ONLN): ETF Research Reports
 
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