3 ETFs to buy on great Facebook earnings

Based on impressive results and solid growth prospects, investors could definitely focus on funds that have a larger allocation to this social network giant.

By Zacks.com Jan 31, 2014 6:15PM

Caption: The Facebook logo is seen on a tablet screen
Credit: © Lionel Bonaventure/AFP/Getty ImagesSocial media giant Facebook (FB) once again reported blockbuster results on a big jump in its mobile advertising business and the strongest revenue growth in two years.


The company surpassed our estimates on both top and bottom lines for the third consecutive quarter, lending optimism to the future growth story.


Earnings per share came in at 31 cents per share, strongly outpacing the Zacks Consensus Estimate of 21 cents, and 82 percent above the year-ago earnings. Revenues climbed 63 percent year over year to $2.59 billion and surpassed our estimate of $2.36 billion.


This robust performance was driven by a 76 percent year-over-year increase in advertising revenues. Mobile advertising revenues reached $1 billion for the first time in the company's history and accounted for 53 percent of total revenue, up from 49 percent in prior quarter and 23 percent in the year-ago quarter.


The company saw remarkable growth in both daily (22 percent to 757 million) and monthly active users (16 percent to 1.23 billion) in 2013.


Following the astounding earnings beat, shares of Facebook soared as much as 12 percent to a new high of $60 in after-market hours trading, while shares were trading around $62.20 in early Thursday trading on heavy volume.


Bright outlook
Though declining teen user growth remains a major concern, Facebook's decision to allow teen users to make public posts is a positive step.


The company is still leading the social media market and its services such as Messenger and Instagram are attracting users. In addition, the new products such as video ads and reader are expected to drive top-line growth, going forward.

The company continues to gain market share in the U.S. digital advertising market, in particular the mobile advertisement segment, which is a key growth catalyst. Facebook overtook Yahoo (YHOO) and Microsoft (MSFT) to become the second firm in the digital advertising market, trailing Google (GOOG), as per eMarketer. (Microsoft owns and publishes Top Stocks, an MSN Money site.)


Apart from these, FB recently made its entry into the S&P 500 benchmark, providing a big boost to the company's brand. Moreover, Facebook currently has a Zacks Rank #2 ("buy") and a solid Zacks Industry Rank in the top 34 percent, suggesting that the bullish trend will definitely continue in the near future.


ETFs to buy
Based on impressive results and solid growth prospects, investors could definitely focus on ETFs that have a larger allocation to this social network giant and grab any opportunity from a surge in the Facebook price. For those investors, we have highlighted three ETFs below that are poised to move upward following Facebook's fourth-quarter results:


Global X Social Media Index ETF (SOCL)
This ETF offers the only pure play in the social media space and has amassed $131.7 million in its asset base. The ETF charges 0.65 percent in fees and expenses and sees good volumes of more than 190,000 shares a day.


The product tracks the Solactive Social Media Index, holding 27 securities in the basket. Of these firms, Facebook takes the second spot, making up roughly 10.46 percent of assets. In terms of country exposure, U.S. firms take more than half the portfolio, closely followed by China (25 percent) and Japan (8 percent).


The ETF is down nearly 5 percent year-to-date and 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 $382.7 million in AUM and charges 60 bps in fees a year. Volume is good as it exchanges nearly 110,000 shares a day on average.


In total, the fund holds 100 securities in its basket with FB at the top with 10.11 percent allocation. The product is slight tilted toward consumer discretionary at nearly 27 percent while information technology, energy and healthcare round off the next three spots. FPX lost over 4 percent so far this year.


PowerShares Nasdaq Internet Portfolio (PNQI)
This fund follows the Nasdaq Internet Index, giving investors exposure to the broad Internet industry. The fund holds 80 stocks in its basket with AUM of $315.9 million while charging 60 bps in fees per year. The ETF trades in light volume of nearly 67,000 shares a day.
 

Facebook occupies the top position in the basket with 9 percent of assets. In terms of industry exposure, the Internet mobile application sector makes up for more than two-third share in the basket, followed by Internet retail (30 percent). PNQI is down nearly 4.5 percent year-to-date and has a Zacks ETF Rank of 1 or "strong buy" with a "high" risk outlook.

 

 
FACEBOOK INC-A (FB): Free Stock Analysis Report (email required)
FT-IPOX 100 (FPX): ETF Research Reports (email required)
PWRSH-ND INTRNT (PNQI): ETF Research Reports (email required)
GLBL-X SOCL MDA (SOCL): ETF Research Reports (email required)
 
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