3 ETFs To Watch On Facebook Earnings

The social media giant Facebook (FB) once again reported blockbuster results for Q3 on continued growth in mobile business. GAAP earnings came in at 17 cents per share, strongly outpacing the Zacks Consensus Estimate of 13 cents per share and growing over twofold year over year.

Revenues climbed 60% year over year to $2.02 billion and surpassed our estimated $1.895 billion. The robust performance was driven by a 66% year-over-year increase in advertising revenues, which accounted for 89% of the total revenue. Notably, mobile advertising revenues accounted for 49% of total revenue, up from 41% in Q2.

Facebook saw remarkable growth in both daily and monthly active users (25% to 728 million and 18% to 1.19 billion, respectively) in the third quarter (see, Internet ETFs in Focus on Amazon Sales Beat).

Any Reason To Worry?
Immediately following the astounding earnings beat, shares of FB soared as much as 18% to a new high of more than $56 in after-market hours trading yesterday. But the company’s conference call eroded all the gains and the stock was nearly flat at the close.

This is because the management, in the conference call, said that though overall teen user growth is stable, the younger teen usage is declining. Additionally, the company is cautious about the ramp-up of Newsfeed ads that could put pressure on its revenue growth going forward.

This negative market reaction on the declining teen user growth and stable Newsfeed ads should be rather ‘short lived’ as Facebook is still leading the social media market and is stll attracting new users.

Further, Facebook currently has a Zacks Rank #2 (Buy) and an Outperform recommendation for the long term, suggesting that the bullish trend can definitely continue in the near future.

ETF Impact
Many ETFs with heavy exposure to the networking giant are enjoying huge gains as Facebook has made an impressive comeback after its second quarter results. In fact, FB share price more than doubled over the past three months, suggesting that the worst might be over for the company (see, 3 ETFs with the Most Facebook Exposure in Focus).

Below, we have highlighted three popular ETFs that have larger allocation to FB and seem to be in focus. Investors should closely monitor the movement in these funds and grab any opportunity from a surge in the FB price:

Global X Social Media Index ETF (SOCL)
This ETF offers the only pure play in the social media space. The fund has so far amassed $97.4 million in its asset base. The ETF charges 0.65% in fees and expenses and sees moderate volumes of roughly 88,000 shares a day (see, Social Media ETF in Focus As Twitter Plans IPO).

The product tracks the Solactive Social Media Index, holding 27 securities in the basket. Of these firms, Facebook takes the top spot, making up roughly 13.04% of assets. In terms of country exposure, U.S. firms take half of the portfolio, closely followed by China (30%) and Japan (7%).

The ETF is up 52.78% year-to-date and increased 15.5% in the trailing three-month period. The fund currently has a Zacks ETF Rank of 2 or ‘Buy’ rating with a ‘High’ risk outlook.

First Trust US IPO Index Fund (FPX)
This ETF provides exposure to the booming U.S. IPO market by tracking the IPOX-100 U.S. Index. The fund has accumulated $236.5 million in AUM and charges 60 bps in fees a year. Volume is rather light as it exchanges nearly 57,000 shares in hand on average.

In total, the fund holds 100 securities in its basket. Here again, Facebook is the top firm with 10.47% allocation. The product has a nice mix of sectors, with the top four being consumer discretionary, information technology, energy and healthcare.

FPX gained over 9% in the past three months and is up about 39.3% in the year-to-date time frame (see, 3 Niche ETFs Crushing the Market).

PowerShares Nasdaq Internet Portfolio (PNQI)
This fund follows the Nasdaq Internet Index, giving investors exposure to the broad Internet industry. The fund holds over 80 stocks in its basket with AUM of $218.1 million while charging 60 bps in fees per year. The ETF trades in light volume of nearly 40,000 shares a day.

Facebook occupies the third position in the basket with 8.46% of assets. In addition to information technology, the product also offers exposure to consumer discretionary firms (31%) (see, The Incredible Run for NFLX Puts These ETFs in Focus).

PNQI gained 14.27% over the trailing three months and nearly 51% so far this year. The product has a Zacks ETF Rank of 1 or ‘Strong Buy’ with a ‘High’ risk outlook.

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