Facebook Slump Drags Down Tech ETFs: Any Winners?

Facebook (FB - Free Report) suffered its worst ever one-day drop of nearly 19% in Thursday trading session. This has erased nearly $120 billion from the stock’s market capitalization, the largest one-day drop in the history of the American stock market, even worse than Intel’s (INTC) market-cap loss of $90.74 billion on Sep 22, 2000.  

The freefall in FB stock came after awful Q2 earnings results, wherein the social media giant missed the Zacks Consensus Estimate for the first time in nine quarters on earnings and in 13 quarters on revenues. User growth of 11% also slowed from that of 13% in the prior quarter. Additionally, it warned of continued deceleration in revenues in the second half of the year, with revenue growth rates expected to decline by high single-digit percentages sequentially in both the third and fourth quarters. Further, the company expects operating expense to grow faster than revenues this year, by an expected 50-60%, higher than 32% recorded in 2017.

With the slide, Facebook slipped into the red for the year and is just a few points away from entering a bear market. The malaise has spread over to the broad tech sector and the broader U.S. stock market, shaving off more than 1% from the tech-heavy Nasdaq Composite Index.

ETFs That Lost Most

The terrible trading has also been felt in the ETFs having a larger allocation to the networking giant. Communication Services Select Sector SPDR (XLC - Free Report) and Global X Social Media Index ETF (SOCL - Free Report) stole the show, tumbling 3.7% and 3.5%, respectively, on the day while First Trust Dow Jones Internet Index Fund (FDN - Free Report) and Invesco NASDAQ Internet ETF (PNQIFree Report) shed 2.3% each.

Solid Buying Point

The beaten down prices could be an attractive entry point for investors given the encouraging outlook for the sector. This is especially true as the tech sector appears fully emerged from the burst of the dot-com bubble. The emergence of cutting-edge technology such as cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, and artificial intelligence as well as strong corporate earnings are acting as the key catalysts.

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