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ETFs in Focus on Amazon's Q1 Earnings Beat, Soft Guidance

Sweta Killa

After the closing bell on Thursday, the online e-commerce behemoth Amazon AMZN cheered investors with a huge earnings beat in Q1. However, revenues were on par with the Zacks Consensus Estimate. Amazon is experiencing slowing revenue growth but fatter profit margins as Amazon's push into advertising and cloud computing is paying off.

Earnings per share came in at $7.09, easily beating the Zacks Consensus Estimate of $4.61 and more than double the year-ago earnings of $3.27. Revenues climbed 17% year over year to $59.7 billion. In particular, revenues from the cloud computing business — Amazon Web Services — surged 41% year over year to $7.7 billion (read: 5 Top-Ranked Stocks in S&P 500 ETF Up More Than 50%).

However, the company offered downbeat revenue guidance for the ongoing quarter. For the second quarter of 2019, the company expects revenues to grow 13-20% to $59.5-$63.5 billion. The mid-point of the range is slightly below the current Zacks Consensus Estimate of $62.53 billion, which indicates 18.23% growth. Amazon announced that it will now offer one-day delivery on most goods for its Prime membership instead of two-day. This new initiative will weigh on the operating profit in the second quarter.

Market Impact

The huge earnings beat pushed shares of AMZN higher as much as 2% in aftermarket hours on elevated volume. However, most of the gains were erased at the end of afterhours trading, with just 0.6% gains due to a lower-than-expected outlook. The stock currently has a Zacks Rank #2 (Buy) and a VGM Score of B, suggesting that Amazon is primed for growth in the future. Amazon belongs to a bottom-ranked industry (bottom 34%).

Given this, ETFs with the highest allocation to this Internet giant are in focus for the coming days and investors should definitely cash in on the opportune moment when arises. Below, we have highlighted five of them:

Fidelity MSCI Consumer Discretionary Index ETF FDIS

This fund tracks the MSCI USA IMI Consumer Discretionary Index, holding 292 stocks in its basket. Of these, AMZN takes the top spot with 25.1% share. Internet & direct marketing retail makes up for the top sector with 31.4% share followed by specialty retail (21.8%), and hotels, restaurants & leisure (19.4%). The product has amassed $704.1 million in its asset base while trading in a good volume of around 279,000 shares a day on average. It charges 8 bps in annual fees from investors and has a Zacks ETF Rank #2 with a Medium risk outlook (see: all the Consumer Discretionary ETFs here).

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 $13.6 billion and average daily volume of around 6.3 million shares. Holding 64 securities in its basket, Amazon takes the top spot with 24.2% of assets. Internet & direct marketing retail dominates about 30% of the portfolio, while specialty retail, and hotels restaurants and leisure round off the next two spots with a double-digit allocation each. The fund charges 0.13% in expense ratio and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Consumer ETFs: Bull Market Winners With Room to Run in 2019).

ProShares Online Retail ETF ONLN

This is the first ETF focused exclusively on retailers that principally sell online. It follows the ProShares Online Retail Index, holding 20 stocks in its basket. Amazon is the top firm accounting for about 23.7% of the portfolio. The product has amassed $24.9 million in its asset base while currently trading in a paltry volume of around 24,000 shares a day on average. It charges 58 bps in annual fees from investors.

Vanguard Consumer Discretionary ETF VCR

This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index and holds 294 stocks in its basket. Of these, Amazon occupies the top position with 22.7% allocation. VCR charges investors 10 bps in annual fees, while volume is moderate at nearly 1212,000 shares a day. The product has managed about $3 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 20.7% share. The product has amassed $78.3 million in its asset base and charges 35 bps in annual fees. Volume is light as it exchanges nearly 30,000 shares per day. RTH has a Zacks ETF Rank #23 (Hold) with a Medium risk outlook (read: Forget Earnings Recession: Tap Revenue Growth With These ETFs).

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