Facebook Tumbles Post Q4 Results: What's In Store For ETFs?

After the closing bell on Wednesday, Facebook (FB - Free Report) came up with robust fourth-quarter 2019 results wherein it beat estimates on both revenues and earnings. However, the slowdown in revenue growth and warnings of decelerated expansion disappointed investors, sending shares of Facebook down more than 7% in aftermarket hours.

Adjusted earnings per share came in at $2.56, crushing the Zacks Consensus Estimate of $2.52 and increasing from the year-ago earnings of $2.38. Revenues increased 25% year over year to $21.08 billion and edged past the estimated $20.88 billion. It was the slowest-ever quarterly sales growth for Facebook.
 

Daily and monthly active users grew 9% and 8% year over year, respectively, to 1.66 billion and 2.5 billion. The company estimates that about 2.89 billion people use Facebook, WhatsApp, Instagram or Messenger ("Family" of services) each month, and about 2.26 billion people use at least one of the Family of services every day on average.

On the conference call, the social media giant warned that the pace of expansion will slow further in the first quarter of 2020 as it is facing more-restrictive privacy regulations and continued scrutiny from global lawmakers and antitrust officials. The company expects new rules and product changes aimed at protecting users' privacy to result in increasing expenses significantly.

Currently, Facebook has a Zacks Rank #3 (Hold) and a VGM Score of A. However, it belongs to a bottom-ranked Zacks industry (bottom 33%).

ETFs to Watch

Given this, ETFs having a larger allocation to the networking giant are in focus post-Facebook results. 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 $7.3 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 19.8%. About 46.4% of the portfolio is allocated to interactive media & services, while entertainment, media, and diversified telecommunication services round off the next three. The product charges 15 bps in annual fees and trades in average daily volume of 3.1 million shares. It has a Zacks ETF Rank #2 (Buy).

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