Facebook (NASDAQ:FB) is expected to release first-quarter results on Apr. 28 after the market close. Wall Street will use the occasion to analyze the company’s various metrics, including revenue growth, number of daily and monthly active users (DAUs and MAUs), as well as average revenue per user (ARPU).
According to Q4 results announced in late January, quarterly revenue was $28.1 billion. DAUs came at 1.84 billion, up 11% year-over-year (YoY). ARPU was $10.14.
Over the past year, FB stock has returned around 77%. The shares hit a record high of $315.88 on Apr. 8. Year-to-date (YTD), the stock is up about 14%. Analysts’ 12-month price targets for the shares rage from $418 to $420.
The social media giant's products include the namesake platform Facebook, Instagram, Messenger, WhatsApp and Oculus. The company holds extensive demographic data that enables advertisers to target audiences effectively. Thus, it remains unmatched in its ad-pricing power.
At present, "the most popular social networks worldwide ... ranked by number of active users" are Facebook, Youtube (owned by Google), WhatsApp, Facebook Messenger and Instagram. Facebook and Google's Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) have more than a 50% combined share of the U.S. digital ad market. Next in line is Amazon (NASDAQ:AMZN) with around 10%.
As of January 2021, there are “4.20 billion social media users around the world. This figure has grown by 490 million over the past 12 months, delivering year-on-year growth of more than 13%. The number of social media users is now equivalent to more than 53% of the world’s total population."
Now, investors wonder what to expect from FB stock around the release of earnings. Price moves in momentum shares tend to be volatile, especially when announcements are due. In addition, tech stalwarts, including Facebook, regularly make the headlines as their various business practices, especially involving data collection, come under global scrutiny.
Therefore, many investors might be nervous about committing full capital into the stock right now. Today, we introduce two exchange-traded funds (ETFs) with FB as a leading holding. These funds might provide an alternative way to invest in the shares.
1. Communication Services Select Sector SPDR Fund
Current Price: $76.71
52-week Range: $45.56 - $77.39
Current Dividend Yield: 0.77%
Expense Ratio: 0.12% per year
The Communication Services Select Sector SPDR® Fund (NYSE:XLC) gives access to US-based businesses from telecommunication services, entertainment and interactive media segments. The fund was launched in June 2018 and has $13.3 billion under management.
XLC, which has 26 holdings, tracks the returns of the Communication Services Select Sector index. The top 10 names comprise around 80% of the fund, where Facebook has the highest weighting. Other leading names include Alphabet, Netflix (NASDAQ:NFLX), T-Mobile US (NASDAQ:TMUS), and Activision Blizzard (NASDAQ:ATVI).
YTD, the fund is up more than 13% and, like Facebook, hit a record high on Apr. 8. Therefore, those investors who believe social media and advertising will likely be dominant themes in the coming quarters might want to research XLC further, with a view to buy the dips.
2. Global X Social Media ETF
Current Price: $70.29
52-week Range: $30.27 - $79.00
Expense Ratio: 0.65% per year
The Global X Social Media ETF (NASDAQ:SOCL) invests in global social media companies. The fund started trading in November 2011, and net assets stand close to $453 million.
SOCL, which has 39 holdings, tracks the returns of the Solactive Social Media Total Return Index. Close to half of the firms come from the US, followed by China (28.2%), South Korea (9.5%), Japan (4.8%) and others.
Close to 65% of the assets are held in the top 10 stocks, with Facebook having the largest slice (12.64%). Among the other leading names are Tencent (HK:0700) (OTC:TCEHY), Snap (NYSE:SNAP), Twitter (NYSE:TWTR), Alphabet, Kakao (KS:035720) and Pinterest (NYSE:PINS).
So far in 2021, the ETF is up close to 13% and hit an all-time high Feb. 16. We like the global diversification offered by this thematic fund. The digitalization trend of the past year has benefitted social media businesses worldwide. We can expect advertising dollars to shift to such digital platforms in the coming quarters, too. Interested investors could regard the recent decline from the highs as a good opportunity to buy into SOCL shares.
On a final note, we need to highlight that the expense ratio of 0.65% is relatively high compared with conventional ETFs.