ETFs In Focus On Alibaba Earnings Miss

Chinese e-commerce giant Alibaba Group (NYSE:BABA) reported third-quarter fiscal 2018 results before the opening bell yesterday wherein it missed the earnings expectation but beat on the top line and lifted its fiscal year revenue guidance.

Earnings of $1.63 per ADS came in a couple of cents below the Zacks Consensus Estimate. Revenues jumped 56% year over year to $12.76 billion and surpassed the estimate of $12.13 billion. The robust revenue performance was credited to the Singles' Day sales event held on Nov 11, the world's biggest shopping spree, driven by growing core e-commerce business, booming cloud computing services and strong media and entertainment growth (read: 4 Hot ETF Deals for Singles' Day).

Core e-commerce revenues grew 57% year over year, cloud computing revenues soared 104% while digital media and entertainment revenues increased 33%. Mobile monthly active users in its China retail marketplaces increased 5.3% year over year to 580 million while annual active buyers reached 515 million, up 27% year over year.

The Chinese online retail giant has been expanding its presence in core online retail business with investments in supermarkets and stores as well as investing in new artificial intelligence and cloud computing businesses. As such, it raised its full-year revenue growth outlook to 55-56% from 49-53%.

Alibaba also announced that it will acquire 33% of Ant Financial, the electronic payment firm Alibaba spun- off in 2011 just ahead of its initial public offering (IPO) (read: Play IPO's Decade-High Start to 2018 With These ETFs).

Market Impact

Following the earnings results, BABA shares plummeted nearly 6% as the company’s strong sales outlook was offset by earnings miss and its Ant Financial stake plan. However, the pain seems short-lived given that the stock has a Growth Style Score of B and belongs to the top-ranked Zacks industry (top 43%). Additionally, Alibaba has a Zacks Rank #3 (Hold).

Given this, the dip in the share price of Alibaba could be a good opportunity for investors to cash in on. As a result, we have highlighted six ETFs having the highest allocation to the Chinese e-commerce giant that have upside potential in the coming months (see: all the Technology ETFs here).

BLDRS Emerging Markets 50 ADR Index Fund ADRE

The product offers exposure to the 50 emerging market-based depositary receipts by tracking the BNY Mellon Emerging Markets 50 ADR Index. About 42% of the portfolio is allotted to the Chinese firms with Alibaba occupying the top position at 17.3%. Brazil, Taiwan and India round off the next three spots, in terms of country exposure. From a sector look, information technology accounts for 42.3% share, followed by financials (17.4%), telecom services (10.9%) and energy (8.9%). ADRE has amassed $184.5 million in its asset base while trades in a light volume of about 12,000 shares. It charges 30 bps in fees per year and lost nearly 1% on the day. ADRE has a Zacks ETF Rank #3 with a Medium risk outlook.

iShares MSCI China ETF MCHI

This ETF follows the MSCI China Index, holding 155 securities in its basket. Of these, Alibaba takes the second spot with 13% share. From a sector look, about 41.2% of the portfolio is allotted to information technology while financials (23.8%) and consumer discretionary (8.9%) round off the next three spots. The fund has amassed $3.5 billion in its asset base while charging 62 bps in annual fees. Volume is also solid as it exchanges nearly 1.7 million shares on average daily basis. The ETF shed 2.3% following the results and has a Zacks ETF Rank #3 with a Medium risk outlook (read: China ETFs in Focus as GDP Beats Expectations).

BLDRS Asia 50 ADR Index Fund ADRA

This ETF follows the capitalization-weighted BNY Mellon Asia 50 ADR Index and tracks the performance of approximately 50 Asian market-based DRs. Though Japanese firms make up for the largest share at 35.1%, Chinese firms account for 32.6% of assets. As such, Alibaba takes the top spot in the basket at 12.9%. ADRA is often overlooked by investors as depicted by its AUM of $24.2 million and average daily volume of under 2,000 shares. It charges 30 bps in annual fees and lost 0.5% on the day post BABA results. The fund has a Zacks ETF Rank #3 with a Medium risk outlook.

Guggenheim China Technology ETF CQQQ

This fund targets the overall technology sector in China and follows the AlphaShares China Technology Index. Holding 79 stocks, Alibaba occupies the second position in the basket with 9.1% share. The product manages an asset base of $495.9 million while trades in good volume of around 186,000 shares a day. Expense ratio comes in at 0.70%. CQQQ lost 2.2% on the day, following Alibaba results and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: 5 Tech ETFs That Crushed FANG ETFs in 2017).

Guggenheim BRIC ETF (CN:EEB)

This product provides exposure to BRIC countries and follows the BNY Mellon BRIC Select DR Index. In total, it holds 117 stocks with Alibaba at the top position, accounting for 9.1% of assets. Energy and information technology takes the largest share from a sector look at 24.6% and 19.1%, respectively, while financials round off the next spot with a double-digit exposure. The ETF has $91.9 million in AUM and sees a light volume of around 11,000 shares. Expense ratio comes in at 0.64%. The fund was down 0.9% on the day and has a Zacks ETF Rank #3 with a Medium risk outlook.

KraneShares CSI China Internet Fund KWEB

This product provides a concentrated exposure to the Chinese Internet market by tracking the CSI China Overseas Internet Index. In total, the fund holds 35 securities in its basket with Alibaba occupying the second spot at 9.04%. The technology sector makes up for a substantial 60% of total assets, while consumer discretionary takes the remainder with just 2.5% allotted to industrials. The ETF has AUM of $1.7 billion and charges 72 bps in annual fees from investors. Volume is solid as it exchanges around 580,000 shares in hand per day. KWEB shed 2.2% in the last trading session, following the Alibaba earnings announcement, and currently has a Zacks ETF Rank #3 with a High risk outlook.

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Alibaba Group Holding Limited (BABA): Free Stock Analysis Report

GUGG-CHINA TEC (CQQQ): ETF Research Reports

ISHARS-MS CH IF (MCHI): ETF Research Reports

GUGG-BRIC (EEB): ETF Research Reports

BLDRS ASIA 50 (ADRA): ETF Research Reports

BLDRS-EMER MKTS (ADRE): ETF Research Reports

KRANS-C CHN INT (KWEB): ETF Research Reports

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