The Zacks Analyst Blog Highlights: Facebook, Global X Social Media Index ETF, First Trust Dow Jones Internet Index, First Trust US IPO Index Fund and PowerShares Nasdaq Internet Portfolio
Zacks Equity Research
Updated
For Immediate Release
Chicago, IL – April 29, 2016 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Facebook (FB), Global X Social Media Index ETF (SOCL), First Trust Dow Jones Internet Index (FDN), First Trust US IPO Index Fund (FPX) and PowerShares Nasdaq Internet Portfolio (PNQI).
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Here are highlights from Thursday’s Analyst Blog:
Another Blowout Quarter for Facebook ETFs to Ride
After a spate of disappointing earnings reports from tech giants the social media king finally brought the silver lining in the broad sector after the closing bell yesterday (read: Tech ETFs in Trouble Post Rotten Q2 Apple Results ).
Facebook (FB) delivered spectacular results yet again for the first quarter 2016 buoyed by the strength in mobile advertising business and growing momentum for video advertising. While the company surpassed our estimates on both the top and the bottom lines, the promising proposal by the CEO Mark Zuckerberg to offer new C-class shares (non-voting shares) as a dividend to existing shareholders also played a major role in spreading optimism.
This sent Facebook shares up more than 9% to a new record high of $119.44 in aftermarket hours. In pre-market trading, the stock hit a high of $121.69 at the time of writing.
Facebook Q1 Results in Detail
Adjusted earnings per share (accounting for stock-based compensation) came in at 57 cents, crushing the Zacks Consensus Estimate by 13 cents. Revenues soared 52% year over year to $5.38 billion and edged past our estimate of $5.23 billion. Growing advertising revenues is the major reason for the outstanding performance.
Advertising revenues grew 56.8% year over year to $5.20 billion. Notably, mobile advertising revenues accounted for 82% of total advertising revenue, up from 80% in the prior quarter and 73% in the year-ago quarter (see: all the Technology ETFs here).
Daily active users grew 16% year over year to $1.09 billion with 989 million coming from mobile. Meanwhile, monthly active users grew 15% year over year to 1.65 billion, of whom mobile active users accounted for 1.51 billion, up 21%. With this, Facebook continues to dominate the social media space as users are spending more than 50 minutes per day on Facebook, Instagram and Messenger.
As per eMarketer, Facebook is expected to garner about 12% of the $186.8 billion global digital advertising market this year, up from 10.7% last year. This is in contrast with Alphabet, which will see its market share falling to 30.9% this year from 33.3% in 2015.
In order to fulfil his promise to give 99% of his wealth to charity, Mark Zuckerberg has proposed to issue two C-class shares as a one-time stock dividend with respect to each class A and class B share. This would potentially allow Zuckerberg to sell some of his shares while still maintaining control of the company. Notably, Class C Shares will have the same economic rights as the current class A and class B shares but will have no voting rights. The proposal is subject to approval from Facebook shareholders at its 2016 annual meeting in June (read: Zuckerberg Philanthropic Zeal Brings These ETFs in Focus ).
Currently, Facebook has a Zacks Rank #1 (Strong Buy) with a top Growth Style Score of A and a solid Zacks Industry Rank in the top 40%, suggesting that the bullish trend will continue at least in the near future.
ETFs in Focus
Based on impressive results, investors could definitely focus on ETFs that have a larger allocation to this networking giant and grab any opportunity from a surge in the price of FB. For those investors, we have highlighted four ETFs that are poised to move upward following Q1 results:
Global X Social Media Index ETF (SOCL)
This fund is the only pure play in the global social media space and has amassed $60.9 million in its asset base. The ETF charges 0.65% in fees and expenses, and sees moderate trading volumes of roughly 66,000 shares a day. The product tracks the Solactive Social Media Total Return Index, holding 29 securities in the basket. Of these firms, Facebook takes the top spot, making up roughly 12.4% of assets. In terms of country exposure, U.S. firms take less than half of the portfolio, closely followed by China (26%), Russia (12%) and Japan (7%). The fund has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook (read:How is Social Media ETF (SOCL - ETF report) Shaping Up in Q1 Earnings?).
First Trust Dow Jones Internet Index (FDN)
This is one of the most popular and liquid ETFs in the broad technology space with AUM of more than $3 billion and average daily volume of around 900,000 shares. The fund follows the Dow Jones Internet Composite Index and holds 42 stocks in its basket. Expense ratio comes in at 0.54%. Facebook occupies the second position in the basket with 9.7% of assets. While information technology makes up for 69.8% share, consumer discretionary accounts for 22.1% of assets. The product has a Zacks ETF Rank of 2 with a High risk outlook.
First Trust US IPO Index Fund (FPX)
This ETF provides exposure to the U.S. IPO market by tracking the IPOX-100 U.S. Index. It has accumulated $587.7 million in AUM and charges 60 bps in fees a year. Volume is moderate as it exchanges nearly 106,000 shares in hand on average. In total, the fund holds 103 securities in its basket with FB at the top, having a 9.5% allocation. From a sector look, information technology takes the largest share at 29.9% while consumer discretionary and health care round of the next two spots with a double-digit exposure each.
PowerShares Nasdaq Internet Portfolio (PNQI)
This fund follows the Nasdaq Internet Index, giving investors exposure to the broad Internet industry. The fund holds about 87 stocks in its basket with AUM of $277.9 million while charging 60 bps in fees per year. It trades in a light volume of around 40,000 shares a day. Facebook takes the fourth position with a 7.7% allocation. In terms of industrial exposure, Internet software and services makes up for 59.5% share in the basket, followed by Internet retail (35.7%). PNQI has a Zacks ETF Rank of 2 with a High risk outlook (read: 7 Best Stocks & ETFs of 7-Year Bull Run).
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