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Facebook Likely to Beat in Q2: 9 ETFs to Buy

Sweta Killa

Social media giant Facebook FB is set to release second-quarter fiscal 2019 results on Jul 24 after market close. The company has gained nearly 11.5% over the past three months, outperforming the industry, which saw average price decline of 16.5%. The strength is expected to continue as Facebook is likely to beat earnings estimates this quarter.

However, it delivered average negative earnings surprise of 4.79% in the past four quarters.

Earnings Whispers

Facebook has a Zacks Rank #2 (Buy) and an Earnings ESP of +0.61%. According to our surprise prediction methodology, the combination of a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) when combined with a positive Earnings ESP increases the odds of an earnings beat. Zacks Rank #4 or 5 (Sell rated) stocks are best avoided going into an 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. The Zacks Consensus Estimate for Q2 earnings indicates growth of 9.2% from the year-ago reported figure. Revenues are expected to increase 24.3% in the soon-to-be-reported quarter.

The stock belongs to a top-ranked Zacks Industry (top 40%) and has a Momentum Score of A. According to the analysts polled by Zacks, Facebook has an average target price of $212.59, with nearly 89% of the analysts giving a Strong Buy or a Buy rating ahead of the company’s earnings. This represents about 5% upside from the current price (read: What's In Store for FAANG ETFs in Q2 Earnings?).

What to Watch

Investors are keen to find out whether Facebook and its share price, which is near an all-time high, will continue to grow amid a slew of challenges including Justice Department’s investigation into its business practices. The social media giant expects revenues to decelerate sequentially throughout 2019, including the second quarter, on a constant currency basis. It also expects advertising related headwinds to be more pronounced in the second half of 2019.

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 nine 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 $5.8 billion and has a Zacks ETF Rank #2 (Buy). Facebook takes the top spot with 19.7% of the portfolio.

Fidelity MSCI Communication Services Index ETF FCOM — This fund manages $348.2 million in its asset base and has a Zacks ETF Rank #2 with a Medium risk outlook. Facebook takes the top spot, making up for 16.1% share (read: Tense About Trade War? Follow Goldman With 5 ETF Strategies).

Vanguard Communication Services ETF VOX — The fund has $2 billion in AUM and carries a Zacks ETF Rank #2 with a Medium risk outlook. Facebook occupies the second position and accounts for 15.7% share.

iShares Global Comm Services ETF IXP — This fund has AUM of $256.5 million and has a Zacks ETF Rank #3 (Hold) 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 with a High risk outlook. Facebook takes the top spot with 13% allocation.

First Trust Dow Jones Internet Index FDN — The fund has AUM of $8.9 billion and has a Zacks ETF Rank #2 with a High risk outlook. Here, FB occupies the second position, accounting for 8.6% share (read: Netflix Posts Q2 U.S. Subscriber Loss: ETFs to Watch).

AdvisorShares New Tech and Media ETF FNG - It has accumulated $14.1 million in its asset base. Facebook occupies the third position with 8.4% of assets.

UP Fintech China-U.S. Internet Titans ETF TTTN – The ETF has AUM of $8.4 million and Facebook is the second firm, making up for 8.3% share in the basket.

Invesco NASDAQ Internet ETF PNQI — It has AUM of $568 million and a Zacks ETF Rank #2 with a High risk outlook. Here, Facebook takes the second spot with 8.3% share.

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