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5 ETFs to Buy on Amazon's Blowout Q3

After the closing bell on Thursday, Amazon AMZN came up with a strong earnings and revenue beat when it reported Q3 earnings. In fact, the online e-commerce behemoth once again posted record profit and revenues buoyed by a massive boost from the accelerated adoption of e-commerce amid the COVID-19 pandemic.

Earnings per share came in at $12.37, strongly above the Zacks Consensus Estimate of $7.30 and higher than the year-ago earnings of $4.23. Revenues climbed 37% year over year to a record $96.1 billion and edged past the consensus estimate of $92.9 billion. In particular, revenues from the cloud computing business — Amazon Web Services — surged 29% year over year to $11.6 billion (see: all the Consumer Discretionary ETFs here).

The company offered an upbeat revenue guidance of $112-$121 billion, suggesting 28-38% growth year over year for the holiday quarter. The mid-point of the range is above the current Zacks Consensus Estimate of $112.5 billion, which indicates 28.7% growth.

Market Impact

Despite the strong results, AMZN shares dropped 1.6% in aftermarket hours on elevated volume. The stock currently has a Zacks Rank #3 (Hold) and Growth Score of A, suggesting that Amazon is primed for growth. Further, Amazon belongs to a top-ranked industry (top 47%).

Given this, investors could tap Amazon in the form of ETFs with the highest allocation to this Internet giant. Below we have highlighted five of them:

Fidelity MSCI Consumer Discretionary Index ETF FDIS

This fund tracks the MSCI USA IMI Consumer Discretionary Index, holding 261 stocks in its basket. Of these, AMZN takes the top spot with 32.2% share. Internet & direct marketing retail makes up for the top sector with 37.6% share followed by specialty retail (19.2%), and hotels, restaurants & leisure (13.7%). The product has amassed $1 billion in its asset base while trading in a good volume of around 235,000 shares a day on average. It charges 8 bps in annual fees from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

ProShares Online Retail ETF ONLN

This is the first ETF focused exclusively on retailers that principally sell online or through other non-store channels. It follows the ProShares Online Retail Index, holding 26 stocks in its basket. Amazon is the top firm accounting for about 24% of the portfolio. The product has amassed $686.5 million in its asset base while currently trading in a paltry volume of around 240,000 shares a day on average. It charges 58 bps in annual fees from investors.

Consumer Discretionary Select Sector SPDR Fund XLY

This product offers exposure to the broad consumer discretionary space by tracking the Consumer Discretionary Select Sector Index. It is the largest and most-popular product in this space, with AUM of nearly $16.2 billion and average daily volume of around 3.6 million shares. Holding 61 securities in its basket, Amazon takes the top spot with 23.3% of assets. Internet & direct marketing retail dominates about 28.8% of the portfolio, while specialty retail, and hotels restaurants and leisure round off the next two spots with a double-digit allocation each. The fund charges 0.13% in expense ratio and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Will ETFs Gain on Upbeat US Consumer Sentiments in October?).

Vanguard Consumer Discretionary ETF VCR

This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index and holds 290 stocks in its basket. Of these, Amazon occupies the top position with 21.5% allocation. Internet & direct marketing retail takes the largest share at 28.3% while home improvement retail and restaurants round off the next two spots with a double-digit exposure each. VCR charges investors 10 bps in annual fees, while volume is moderate at nearly 141,000 shares a day. The product has managed about $3.9 billion in its asset base and carries a Zacks ETF Rank #2 with a Medium risk outlook.

VanEck Vectors Retail ETF RTH

This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. Of these, AMZN takes the top position in the basket with 19.3% share. The product has amassed $184.1 million in its asset base and charges 35 bps in annual fees. Volume is light as it exchanges nearly 14,000 shares per day. RTH has a Zacks ETF Rank #3 with a Medium risk outlook (read: Buy E-Commerce ETFs to Tap "Safe & Early" Holiday Shopping).

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Amazon.com, Inc. (AMZN): Free Stock Analysis Report
 
VanEck Vectors Retail ETF (RTH): ETF Research Reports
 
Vanguard Consumer Discretionary ETF (VCR): ETF Research Reports
 
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
 
Fidelity MSCI Consumer Discretionary Index ETF (FDIS): ETF Research Reports
 
ProShares Online Retail ETF (ONLN): ETF Research Reports
 
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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