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Facebook ETFs in Focus Ahead of Q1 Earnings

Sweta Killa

Social media giant Facebook FB is set to release first-quarter fiscal 2019 results on Apr 24 after market close. The company has gained nearly 21% over the past three months. The strength is expected to continue given that Facebook has a reasonable chance of beating earnings estimates this quarter.


 

Earnings Whispers

Facebook has a Zacks Rank #3 (Hold) and an Earnings ESP of +2.89%. According to our surprise prediction methodology, the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 when combined with a positive Earnings ESP increases the odds of an earnings beat. A Zacks Rank #4 or 5 (Sell rated) stock is best avoided going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Facebook saw no earnings estimate revision over the past 30 days for the soon-to-be-reported quarter. It is expected to record earnings decline of 2.4% but revenues are expected to increase 25% in the soon-to-be-reported quarter. Facebook’s earnings surprise history is robust with the company delivering positive earnings surprise of 13.48% on average over the past four quarters (read What's in the Cards for FAANG ETFs This Earnings Season?).

The stock belongs to a bottom-ranked Zacks Industry (bottom 34%) and has a Growth Score of B. According to the analysts polled by Zacks, Facebook has an average target price of $196.32, with nearly 85% of the analysts giving a Strong Buy or a Buy rating ahead of the company’s earnings. This represents about 8% upside from the current price.

What to Watch

Decelerating revenue and a narrowing operating margin will continue to weigh on earnings per share. The social media giant expects revenues to decelerate by mid-single digits, excluding currency fluctuations, in the first quarter and slow down throughout the year due to shifts in its advertising business. The company also expects total expenses to rise 40-50% for the full year.

ETFs in Focus

Given this, ETFs having the highest allocation to the social media giant will be in focus going into its earnings announcement. These funds would be the potential movers if Facebook comes up with a positive earnings surprise. While there are several ETFs in the space with FB in their basket, we have highlighted seven funds that have the social media giant in their top five holdings (see: all the Technology ETFs here):

Communication Services Select Sector SPDR XLC — The ETF has accumulated $5.7 billion and has a Zacks ETF Rank #1 (Strong Buy). Facebook takes the top spot with 18.8% of the portfolio (read: U.S. Stocks Near Record High: Top-Ranked ETFs to Buy).

Fidelity MSCI Communication Services Index ETF FCOM — This fund has managed $344.4 million in its asset base and has a Zacks ETF Rank #1 with a Medium risk outlook. Facebook takes the top spot, making up for 14.9% share.

Vanguard Communication Services ETF VOX — The fund has $1.9 billion in AUM and carries a Zacks ETF Rank #1 with a Medium risk outlook. Facebook occupies the second position and accounts for 14.6% share.

iShares Global Comm Services ETF IXP  — This fund has AUM of $253.3 million and has a Zacks ETF Rank #1 with a Medium risk outlook. Facebook takes the top spot, making up for 11.5% share.

Global X Social Media Index ETF SOCL — The fund has amassed $139.6 million in its asset base and carries a Zacks ETF Rank #3 (Hold) with a High risk outlook. Facebook takes the third spot with 10.5% allocation.

Invesco NASDAQ Internet ETF PNQI — It has AUM of $582.4 million and a Zacks ETF Rank #3 with a High risk outlook. Here, Facebook takes the second spot with 8.3% share (read: Netflix Beats, Guides Lower: ETFs in Focus).

First Trust Dow Jones Internet Index FDN — The fund has AUM of $8.8 billion and has a Zacks ETF Rank #2 with a High risk outlook. Here, FB occupies the second position, accounting for 7.9% share.

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