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ETFs to Watch as Amazon Beats on Q4 Earnings, Guides Weak

Sweta Killa

After the closing bell on Thursday, the online e-commerce behemoth Amazon AMZN reported strong Q4 results, beating the estimates for both earnings and revenues.

Earnings per share came in at $6.04, easily beating the Zacks Consensus Estimate of $5.55 and improving from the year-ago earnings of $3.75. Revenues climbed 20% year over year to $72.4 billion and edged past the estimate of $71.93 billion. The revenue growth rate is the slowest since the first quarter of 2015 (read: Will Amazon Recover From Q4 2018 Slump? ETFs in Focus).

In particular, revenues from the cloud computing business — Amazon Web Services — surged 45% year over year to $7.4 billion.

However, the company offered downbeat revenue guidance for the ongoing quarter. For the first quarter of 2019, the company expects revenues to grow 10-18% to $56-$60 billion. The high end of the range is much below the current Zacks Consensus Estimate of $61.60 billion, which indicates 19.88% growth. Amazon warned that new regulations in India had created uncertainty around one of its key growth markets.

Market Impact

The soft guidance pushed shares of AMZN lower by as much as 5% in aftermarket hours on elevated volume. The beaten down price might be a solid entry point for investors, given that the company has a track record of giving conservative guidance. Additionally, the stock currently has a Zacks Rank #2 (Buy) and a VGM Score of B. Amazon also belongs to a top-ranked industry (top 34%), suggesting that Amazon is primed for growth in the future (read: 5 Sector ETFs & Stocks to Shine on Upbeat December Jobs Data).

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 same trend. 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 293 stocks in its basket. Of these, AMZN takes the top spot with 24.3% share. Internet & direct marketing retail makes up for the top sector with 31% share followed by specialty retail (21.4%), and hotels, restaurants & leisure (19.9%). The product has amassed $597.6 million in its asset base while trading in a good volume of around 283,000 shares a day on average. It charges 8 bps in annual fees from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Vanguard Consumer Discretionary ETF VCR

This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index and holds 327 stocks in its basket. Of these, Amazon occupies the top position with 22.7% allocation. Internet & direct marketing retail takes the largest share at 29.4%, while restaurants and home improvement retail make up for double-digit exposure each. VCR charges investors 10 bps in annual fees, while volume is moderate at nearly 121,000 shares a day. The product has managed about $2.5 billion in its asset base and carries a Zacks ETF Rank #2 with a Medium risk outlook (read: 5 Discretionary ETFs in Focus on Low Consumer Confidence).

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 $12.3 billion and average daily volume of around 7.1 million shares. Holding 65 securities in its basket, Amazon takes the top spot with 22.9% of assets. Internet & direct marketing retail dominates about 29.1% 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.

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 21 stocks in its basket. Amazon is the top firm accounting for about 24.2% of the portfolio. The product has amassed $32.7 million in its asset base while currently trading in a paltry volume of around 21,000 shares a day on average. It charges 58 bps in annual fees from investors (read: Best-Performing ETFs of January).

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 19.1% share. The product has amassed $107 million in its asset base and charges 35 bps in annual fees. Volume is light as it exchanges nearly 34,000 shares per day. RTH has a Zacks ETF Rank #2 with a Medium risk outlook.

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Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports
VanEck Vectors Retail ETF (RTH): ETF Research Reports
Consumer Discretionary Select Sector SPDR Fund (XLY): ETF Research Reports
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