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ETFs to Buy on Blockbuster Facebook 4Q Results

Sweta Killa

After the closing bell on Wednesday, Facebook (FB) impressed investors’ with another record performance, this time for fourth quarter fiscal 2015, buoyed by heavy dominance in mobile advertising business. The social media giant not only beat our estimates on earnings and revenues but also logged in over $5 billion in revenues and more than $1 billion in quarterly net income for the first time in its history.

The robust numbers came despite heavy spending on long-term projects including virtual reality, artificial intelligence and extending Internet access to remote areas.

Facebook Q4 Earnings in Detail

Adjusted earnings per share (accounting for stock-based compensation) came in at 59 cents, crushing the Zacks Consensus Estimate by 9 cents. Revenues soared 52% year over year to $5.84 billion and edged past our estimate of $5.36 billion. This represents the strongest revenue growth in five quarters. Growth was broad based with advertising revenues firing on all cylinders (read: 5 Sector ETFs & Stocks with Revenue Growth Potential).

Advertising revenues grew 56.8% year over year to $5.64 billion, including $4.51 billion generated from mobile advertising. Notably, mobile advertising revenues accounted for 80% of total advertising revenue, up from 78% in the prior quarter and 69% in the year-ago quarter.

Daily active users grew 17% year over year to $1.04 billion with 934 million coming from mobile. Meanwhile, monthly active users grew 14% year over year to 1.59 billion, of whom mobile active users accounted for 1.44 billion, up 21%. With this, the company set a new milestone in the fourth quarter, wherein more than 90% of daily and monthly active users accessing the social network came from mobile devices. Additionally, Facebook had 100 million hours of video watched per day by the end of 2015.

Following robust results, shares of FB jumped as much as 13% in after-market hours. In pre-market trading, the stock is up 15.4% at the time of writing This suggests solid trading in the coming days as the company’s real growth story hinges on its growing advertising business. As per eMarketer, Facebook mobile advertising revenue will rise to 82% of total advertising revenue this year from the current 70%, driven largely by Instagram and mobile video formats.

Currently, Facebook has a Zacks Rank #3 (Hold) with a top Growth Style Score of A and a solid Zacks Industry Rank in the top 11%, suggesting that the bullish trend will continue at least in the near future (see: all the Technology ETFs here).

ETFs in Focus

Based on impressive results and solid growth prospects, investors could definitely focus on ETFs that have a larger allocation to this networking giant and grab any opportunity from a surge in the FB price. For those investors, we have highlighted four ETFs that are poised to move upward following Q4 results:

Global X Social Media Index ETF (SOCL)

This fund is the only pure play in the global social media space and has amassed $72.7 million in its asset base. The ETF charges 0.65% in fees and expenses, and sees moderate trading volumes of roughly 71,000 shares a day. The product tracks the Solactive Social Media Index, holding 31 securities in the basket. Of these firms, Facebook takes the top spot, making up roughly 10.5% of assets. In terms of country exposure, U.S. firms take less than half of the portfolio, closely followed by China (29%), Russia (9%) and Japan (6%). The fund has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook (read: Stocks & ETFs Below $20 for High Returns).


First Trust Dow Jones Internet Index (FDN)

This is one of the most popular and liquid ETFs in the broad technology space with AUM of more than $3.5 billion and average daily volume of around 822,000 shares. The fund follows the Dow Jones Internet Composite Index and holds 42 stocks in its basket. Expense ratio came in at 0.54%. Facebook occupies the top position in the basket with 10.6% of assets. While information technology makes up for 70.5% share, consumer discretionary accounts for 21.7% of assets. The product has a Zacks ETF Rank of 1 or ‘Strong Buy’ with a High risk outlook.

First Trust US IPO Index Fund (FPX)

This ETF provides exposure to the U.S. IPO market by tracking the IPOX-100 U.S. Index. It has accumulated $637.5 million in AUM and charges 60 bps in fees a year. Volume is good as it exchanges more than 129,000 shares in hand on average. In total, the fund holds 101 securities in its basket with FB at the top, having a 9.9% allocation. From a sector look, information technology takes the largest share at 30.2% while consumer discretionary and health care round of the next two spots with double-digit exposure each.

PowerShares Nasdaq Internet Portfolio (PNQI)

This fund follows the Nasdaq Internet Index, giving investors exposure to the broad Internet industry. The fund holds about 92 stocks in its basket with AUM of $259.6 million while charging 60 bps in fees per year. It trades in light volume of around 33,000 shares a day. Facebook takes the second position with an 8.6% allocation. In terms of industrial exposure, Internet software and services makes up for 58.7% share in the basket, followed by Internet retail (35%). PNQI has a Zacks ETF Rank of 2 with a High risk outlook (read: ETFs to Buy on Netflix Huge Q4 Earnings Beat).


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FACEBOOK INC-A (FB): Free Stock Analysis Report
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