ETFs To Soar On Robust Facebook Q3 Earnings

After the closing bell on Oct 29, Facebook (FB - Free Report) delivered robust third-quarter 2020 results wherein it beat both earnings and revenue estimates.

Adjusted earnings per share came in at $2.71, well above the Zacks Consensus Estimate of $1.94 and year-ago earnings of $2.12. Revenues increased 22% year over year to $21.47 billion and edged past the estimated $19.89 billion. Notably, advertising revenues spiked 22% year over year to $21.2 billion. Better-than-expected results came from the stay-at-home trends that propelled the demand for e-commerce.

Daily and monthly active users grew 12% each year over year to 1.82 billion and 2.74 billion, respectively. The company estimates that about 3.21 billion people use Facebook, WhatsApp, Instagram or Messenger (Family of services) each month, and about 2.54 billion people use at least one of the Family of services every day, on average.

The social media giant expects daily and monthly active users to be flat or slightly down in the United States and Canada in the fourth quarter of 2020 from the third quarter. After two-quarters of slowing growth amid the COVID-19 pandemic, Facebook’s advertising businesses appear to have returned to a steadily clip. As such, the company expects fourth-quarter advertising revenues to be higher than Q3 driven by continued strong advertiser demand during the holiday season.

Shares of Facebook traded in a tight range of down 0.4% to up 0.8% in aftermarket hours on elevated volumes. Currently, Facebook has a Zacks Rank #3 (Hold) and Growth Score of B. However, it belongs to a bottom-ranked Zacks industry (bottom 17%).

ETFs to Soar

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 in detail below:

Communication Services Select Sector SPDR (XLC - Free Report)

This ETF offers exposure to the communication services sector of the S&P 500 Index and has accumulated $10.4 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Facebook occupying the top position at 23.5%. About 50.8% of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two. The product charges 13 bps in annual fees and trades in average daily volume of 3.4 million shares. It has a Zacks ETF Rank #2 (Buy).

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