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ETFs Set to Surge on Facebook's Q3 Earnings Beat

Sweta Killa

After the closing bell on Wednesday, Facebook FB came up with robust third-quarter 2019 results wherein it beat estimates on both revenues and earnings.

Adjusted earnings per share came in at $2.12, crushing the Zacks Consensus Estimate of $1.91 and increasing from the year-ago earnings of $1.76. Revenues increased 29% year over year to $17.65 billion and edged past the estimated $17.32 billion (read: Should You Buy Facebook Ahead of Q3 Earnings?).

Notably, mobile advertising revenues accounted for 94% of total advertising revenues, up from 92% in the year-ago quarter. Daily and monthly active users grew 9% and 8% year over year, respectively, to 1.62 billion and 2.45 billion. The company estimates that about 2.2 billion people use Facebook, WhatsApp, Instagram or Messenger ("Family" of services) each month, and about 2.8 billion people use at least one of the Family of services every day on average.

During the conference call, the social media giant warned of “pronounced deceleration” in Q4 revenues amid overlapping products and “ad-targeting headwinds.” Also, the company expects new rules and product changes aimed at protecting users' privacy to result in a slowdown in revenue growth next year and significantly raise expenses.

Market Impact

Following the results, shares of FB jumped as much as 5.4% in aftermarket hours on elevated volume. Currently, Facebook has a Zacks Rank #3 (Hold) and a VGM Score of C. However, it belongs to a bottom-ranked Zacks industry (bottom 40%).

ETFs to Watch

Given this, ETFs having a larger allocation to the networking giant are poised to surge post Facebook results. We have highlighted six of them in detail below:

Communication Services Select Sector SPDR XLC

This ETF offers exposure to the communication services sector of the S&P 500 Index and has accumulated $6.1 billion in its asset base. It follows the Communication Services Select Sector Index and holds 27 stocks in its basket, with Facebook occupying the top position at 18.9%. About 46.3% of the portfolio is allocated to interactive media & services, while media, entertainment and diversified telecommunication services round off the next three. The product charges 15 bps in annual fees and trades in average daily volume of 3.4 million shares. It has a Zacks ETF Rank #2 (Buy).

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 Facebook occupying the top position at 15.1%. Interactive media & services takes the top spot at nearly 42.8%, while media, entertainment, and diversified telecommunication services round off the next three spots. The product has amassed $443.8 million in its asset base and trades in average daily volume of 90,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook (read: ETFs in Focus on Alphabet's Q3 Results).

Vanguard Communication Services ETF VOX

This fund also targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 113 stocks in its basket, Facebook takes the second spot with 14.4% share. Interactive media & services is the top sector accounting for 43.1% of the portfolio, while integrated telecommunication services, cable & satellite and movies & entertainment, round off the next two. VOX has AUM of $2.1 billion and trades in a good volume of 184,000 shares a day on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.

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 Sector Index. It holds 69 stocks in its basket with Facebook taking the top spot at 12.2% share. Interactive media & services dominate the fund’s return at 38.8%, while integrated telecommunication services round off the next spot with double-digit exposure. The fund has amassed $245.1 million in its asset base, while trading in average daily volume of 40,000 shares. Expense ratio came in at 0.46%. IXP has a Zacks ETF Rank #3 with a Medium risk outlook.

Global X Social Media Index ETF SOCL

This is a pure-play ETF in the global social media space and has amassed $119.6 million in its asset base. It tracks the Solactive Social Media Total Return Index, holding 40 securities in the basket. Of these firms, Facebook takes the top spot, making up for 11.2% of assets. The ETF charges 0.65% in annual fees and sees moderate trading volumes of roughly 17,000 shares a day. The fund has a Zacks ETF Rank #3 with a High risk outlook (read: No Trick, 3 Halloween ETF & Stock Treats for Investors).

First Trust Dow Jones Internet Index FDN

This is one of the most-popular and liquid ETFs in the broad tech space with AUM of $7.7 billion and average daily volume of around 407,000 shares. The fund tracks the Dow Jones Internet Composite Index and charges 52 bps in fees per year. Holding 43 stocks in its basket, Facebook occupies the second position at 7.5%. The product has a Zacks ETF Rank #3 with a High risk outlook.

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