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Facebook ETFs in Focus on Mixed Q3 Earnings

After the closing bell on Oct 25, Facebook FB delivered mixed third-quarter 2021 results wherein it beat earnings estimates but lagged on revenues.

Adjusted earnings per share came in at $3.22, well above the Zacks Consensus Estimate of $3.20 and up 19% from the year-ago earnings. Revenues climbed 35% year over year to $29.01 billion and fell short of the estimated $29.55 billion. Notably, advertising revenues increased 33% year over year to $28.3 billion.

Daily and monthly active users grew 6% year over year each to 1.93 billion and 2.91 billion, respectively. The company stated that about 3.58 billion people use Facebook, WhatsApp, Instagram or Messenger (Family of services) each month (read: Buy the Dip in 5 Top-Ranked Tech ETFs).

The world’s largest social media platform expects fourth-quarter revenues in the range of $31.5-$34 billion, which reflects uncertainty in light of continued headwinds from Apple's iOS 14 changes, and macroeconomic and COVID-related factors. Additionally, it expects non-ads revenue to be down year-over-year in the fourth quarter due to high comparisons to last year's heavy Oculus Quest 2 sales.

The CEO Mark Zuckerberg said, “he was optimistic about the company’s ongoing investment in the metaverse – essentially, a digital world built over our own, comprising virtual reality headsets and augmented reality.” As such, the company announced its plans to break out its Facebook Reality Labs into its own reporting segment starting in the fourth quarter. This means new reporting structure will now divide into two categories: its “family of apps” including Facebook, Instagram, Messenger, WhatsApp and other services, and the “reality labs” products including augmented and virtual reality related consumer hardware, software and content.

Despite the revenue miss, shares of Facebook gained as much as 4% in aftermarket hours. Currently, Facebook has a Zacks Rank #3 (Hold) and Growth Score of B. It belongs to a top-ranked Zacks industry (top 41%).

ETFs in Focus

Given this, investors seeking to bet on Facebook could consider ETFs having a larger allocation to the networking giant. We have highlighted six of them below:

Communication Services Select Sector SPDR Fund XLC

This ETF offers exposure to companies from telecommunication services, media, entertainment and interactive media & services, and has accumulated $15.3 billion in its asset base. It follows the Communication Services Select Sector Index and holds 27 stocks in its basket, with Facebook occupying the top position at 20.7%. About half of the portfolio is allocated to interactive media & services while entertainment, and media round off the next two. The product charges 12 bps in annual fees and trades in an average daily volume of 4.7 million shares. It has a Zacks ETF Rank #1 (Strong Buy) (read: Buy the Dip With These Top-Ranked ETFs).

Fidelity MSCI Communication Services Index ETF FCOM

This fund follows the MSCI USA IMI Communication Services 25/50 Index. It holds 110 stocks in its basket with Facebook occupying the top position at 16.4%. Interactive media & services takes the top spot at 48.2%, while media, entertainment and diversified telecommunication services round off the next three positions. The product has amassed $950.6 million in its asset base and trades in an average daily volume of 88,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook.

Vanguard Communication Services ETF VOX

This fund also targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 114 stocks in its basket, Facebook takes the top spot with 16.2% share. Interactive media & services is the top sector, accounting for 47.7% of the portfolio, while movies & entertainment, cable & satellite, and integrated telecommunication services round off the next three. VOX has AUM of $4.7 billion and trades in a good volume of 120,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

iShares Global Comm Services ETF IXP
 
This ETF provides global exposure to companies in media, entertainment, social media, search engine, video/gaming and telecommunication services by tracking the S&P Global 1200 Communication Services 4.5/22.5/45 Capped Index. It holds 69 stocks in its basket with Facebook taking the top spot at 15.3% share. Interactive media & services dominates the fund’s return at 48.4%, followed by integrated telecommunication services (18%). The fund has amassed $312.1 million in its asset base while trading at an average daily volume of 13,000 shares. Expense ratio comes in at 0.43%. IXP has a Zacks ETF Rank #3 with a Medium risk outlook.

UPHOLDINGS Compound Kings ETF KNGS

This fund is actively managed and seeks long-term growth and income primarily by investing in compounders: companies with the potential to reinvest their own cash flow at above-average rates of return. It holds 26 stocks in its basket with Facebook taking the top spot with 14.3% of assets. The ETF has accumulated $12.1 million in its asset base since its debut last December and charges 60 bps in annual basis. It trades in a volume of 2,000 shares per day on average.

Global X Social Media Index ETF SOCL

This fund provides investors access to social media companies around the world and has amassed $441.4 million in its asset base. It tracks the Solactive Social Media Total Return Index, holding 42 securities in the basket. Of these firms, Facebook takes the top spot, making up for 11.5% of assets. The ETF charges 0.65% in annual fees and sees lower trading volumes of roughly 25,000 shares a day. The fund has a Zacks ETF Rank #3 with a High risk outlook (read: Follow Buffett With These Inflation-Friendly ETF Strategies).


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Facebook, Inc. (FB): Free Stock Analysis Report
 
Global X Social Media ETF (SOCL): ETF Research Reports
 
Vanguard Communication Services ETF (VOX): ETF Research Reports
 
Fidelity MSCI Communication Services Index ETF (FCOM): ETF Research Reports
 
iShares Global Comm Services ETF (IXP): ETF Research Reports
 
Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports
 
UPHOLDINGS Compound Kings ETF (KNGS): ETF Research Reports
 
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