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ETFs in Focus After Alphabet's Impressive Q1 Show

Shubham Jaipuria

Shares of Google parent Alphabet GOOGL jumped 4.27% in after-hours trading on Thursday, April 27, 2017, owing to better than expected results. The company reported a year-over-year 22.2% increase in net quarterly revenues. It beat the Zacks Consensus Estimate on both earnings and revenues in the first quarter of 2017.


Q1 Performance


Alphabet reported non-GAAP earnings per share of $7.73, which beat the Zacks Consensus Estimate of $7.24 and increased from $6.02 in the year-ago period. Moreover, revenues of $20.12 billion (excluding total acquisition costs) came ahead of the consensus mark of $19.65 billion. Operating income rose to $7.598 billion from $6.245 billion a year earlier.


Revenue Performance


Properties revenues (including Traffic Acquisition costs) were up to $17.403 billion from $14.328 billion a year earlier.


Network members’ properties revenues (including Traffic Acquisition costs) increased to $4.008 billion from $3.692 billion a year earlier.


Advertising revenues (including Traffic Acquisition costs) increased to $21.411 billion from $18.02 billion a year earlier.


Other revenues (including Traffic Acquisition costs) increased to $3.095 billion from $2.072 billion a year earlier.


Other bets revenues (including Traffic Acquisition costs) increased to $244 million from $165 million a year earlier.


Total traffic acquisition costs increased to $4.629 billion from $3.788 billion a year earlier.


In the current scenario, we believe it is prudent to discuss the following ETFs that have a relatively high exposure to Alphabet (read: Technology ETFs Set to Rally on Q1 Earnings).


Technology Select Sector SPDR Fund XLK


XLK is a relatively cheaper bet on the technology sector. This fund has AUM of $17.21 billion and charges a fee of 14 basis points a year. It has 5.22% allocation to Alphabet (Class A) (as of April 27, 2017). The fund returned 28.74% in the past one year and 12.16% in the year-to-date time frame (as of April 27, 2017). XLK currently has a Zacks ETF Rank of #2 (Buy) with a Medium risk outlook.


iShares U.S. Technology ETF IYW


This fund provides exposure to the U.S. technology sector. It has AUM of $3.37 billion and charges a fee of 44 basis points a year. It has a 6.13% allocation to Alphabet (Class A) (as of April 26, 2017). The fund returned 34.71% in the past one year and 14.58% in the year-to-date time frame (as of April 27, 2017). IYW currently has a Zacks ETF Rank of #2 with a Medium risk outlook.


First Trust Dow Jones Internet Index Fund FDN


This ETF offers exposure to companies that derive more than half of their revenues from the Internet. It has AUM of $4.16 billion and charges a fee of 54 basis points a year. From a sector look, the fund has high exposure to Information Technology, Consumer Discretionary, and Financials, with 70.01%, 19.80%, and 4.67% allocation, respectively (as of April 26, 2017). It has a 5.01% allocation to Alphabet (Class A) (as of April 26, 2017. The fund returned 32.03% in the past one year and 14.88% in the year-to-date time frame (as of April 27, 2017). FDN currently has a Zacks ETF Rank of #3 (Hold) with a High risk outlook (read: What Made Internet ETFs Outperform in the Bull Market).

Below is a chart comparing the year-to-date performance of Alphabet and the funds discussed.
 


Source: Yahoo Finance


To Conclude


Alphabet reported better-than-expected results. Its share performance has been impressive in the past year (up 25.93%) and year-to-date time frame (up 12.49%). Therefore, we believe the current scenario presents a strong case for investing in these ETFs with high exposure to Alphabet.


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Alphabet Inc. (GOOGL): Free Stock Analysis Report
 
SPDR-TECH SELS (XLK): ETF Research Reports
 
FT-DJ INTRNT IX (FDN): ETF Research Reports
 
ISHARS-US TECH (IYW): ETF Research Reports
 
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