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ETFs in Focus on Alphabet's Q3 Results

Sweta Jaiswal, FRM

After the closing bell on Monday, Google-parent Alphabet GOOGL reported mixed third-quarter 2019 results, with earnings missing and revenues topping estimates. The company saw strength in mobile search, YouTube and Cloud in the quarter. However, due to the mixed results, shares of GOOGL lost as much as 2% in aftermarket hours, per a MarketWatch article. The decline can be partially explained by a loss of $1.5 billion inequity investments in the quarter (read: Microsoft Fiscal Q1 Earnings Put These ETFs in Focus).

Earnings at a Glance

Earnings per share were $10.12, missing the Zacks Consensus Estimate of $12.57 and declining from the year-ago $13.06. Net revenues, excluding total traffic acquisition cost or TAC (TAC is the portion of revenues shared with Google’s partners, and amount paid to distribution partners and others who direct traffic to the Google website) of $7.49 billion, came in at $33.01 billion, up 21.5% year over year. Net revenues surpassed the Zacks Consensus Estimate of $32.84 billion.

Advertising revenues grew 17.2% year over year to $33.92 billion and accounted for 83.8% of total revenues. Paid clicks on Google's own sites and apps jumped 18% year over year while cost-per-click dropped 2% from the year-ago quarter.

Traffic acquisition costs were up 13.8% from the year-ago quarter.

ETFs in Focus                       

The mixed results could have a huge impact on ETFs that are heavily invested in this Internet giant. Below we have highlighted five ETFs with double-digit exposure to Alphabet that could see some losses in today’s trading session (see: all the Technology ETFs here).

Vanguard Communication Services ETF VOX

This fund targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 113 stocks in its basket, Alphabet takes the top spot with 23.1% share. VOX has AUM of $2.10 billion and charges 10 bps in annual fees. The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: ETFs to Tap on Netflix' Strong Subscriber Comeback in Q3).

Fidelity MSCI Communication Services Index ETF FCOM

This fund follows the MSCI USA IMI Communication Services 25/50 Index. It holds 109 stocks in its basket, with Alphabet occupying the third position at 11.34%. The product has amassed $443.2 million in its asset base and charges 8 bps in annual fees. It has a Zacks ETF Rank #3 with a Medium risk outlook.

Communication Services Select Sector SPDR Fund XLC

This ETF tracks the communication services sector of the S&P 500 Index and has accumulated $6.14 billion in its asset base. It follows the Communication Services Select Sector Index and holds 27 stocks in its basket, with Alphabet Inc. Class A occupying the third position with 11.9% weight. The product charges 13 bps in annual fees. It has a Zacks ETF Rank #2 (Buy) (read: U.S. Stocks Near Record High: Top-Ranked ETFs to Buy).

iShares Global Comm Services ETF IXP
 
This ETF provides global exposure to companies in media, entertainment, social media, search engine, video/gaming and telecommunication services by tracking the S&P Global 1200 Communication Services 4.5/22.5/45 Capped Index. It holds 69 stocks in its basket with GOOGL taking the third spot at 10.2% share. The fund has amassed $244.7 million in its asset base. Expense ratio came in at 0.46%. IXP has a Zacks ETF Rank #3 with a Medium risk outlook.

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Alphabet Inc. (GOOGL) : Free Stock Analysis Report
 
iShares Global Comm Services ETF (IXP): ETF Research Reports
 
Vanguard Communication Services ETF (VOX): ETF Research Reports
 
Fidelity MSCI Communication Services Index ETF (FCOM): ETF Research Reports
 
Communication Services Select Sector SPDR Fund (XLC): ETF Research Reports
 
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