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Facebook Q3 Results Help Prop Up Communication, Internet ETFs

This article was originally published on ETFTrends.com.

Communication services and internet ETFs popped after Facebook (etftrends.com/quote/FB) third quarter results easily topped Wall Street expectations.

On Wednesday, the Communication Services Select Sector SPDR Fund (NYSEArca: XLC) gained 2.9%, Vanguard Communication Services ETF (VOX) rose 2.9%, First Trust Dow Jones Internet Index (FDN) increased 3.9% and Global X Social Media ETF (SOCL) advanced 3.4%.

Fueling the momentum in the communications and media segments, Facebook revealed better-than-expected earnings growth in the third quarter, along with stabilizing profit margins and plans for greater monetization of its Messenger, WhatsApp and Instagram platforms despite concerns around the company's user engagement, CNBC reports.

"Monetization of core Facebook and Instagram assets still has material upside potential and Messenger and WhatsApp are beginning early stages of monetization," RBC Capital Markets analyst Mark Mahaney, said in a note. "Even under pressure, Facebook's producing impressive growth."

Facebook shares jumped 4.2% Wednesday, FB makes up 17.5% of XLC's underlying portfolio, 10.5% of SOCL and 7.7% of FDN.

Facebook said the company posted slowing user numbers, especially among European users amid stricter privacy restrictions, which has weighed on its teenage user retention. CEO Mark Zuckerberg said that 2019 would be an investment year for Facebook as the social media giant tackles calculated misinformation campaigns and prevent security breaches.

"We recognize that concerns will remain around engagement and shifting social behavior, but we view the 2 billion+ user base as stickier than many believe, and Facebook is both adapting to and shaping user behavior. We continue to model revenue deceleration, but we believe it is manageable, particularly as Facebook continues to improve ad products and drive strong return on investment, and as marketers do not have good alternatives to Facebook's scale and returns," J.P. Morgan said in a note, adding that it has an overweight position on Facebook.

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