Yahoo Finance Meta Sinks on Weak Outlook Despite Q1 Beat: ETFs in Focus
After the closing bell on Apr 24, Facebook’s parent company, Meta Platforms META, reported better-than-expected first-quarter 2024 results, beating on both the top and bottom lines. However, the social media giant forecast weaker-than-expected revenues for the ongoing quarter and higher capital expenses for 2024.
The dismal outlook sent META shares tumbling as much as 19% in aftermarket hours. It plunged nearly 14% in pre-market trading at the time of writing, erasing nearly $200 billion from the company’s market valuation and bringing it down to about $1 trillion.
This has put ETFs having a large allocation to this social media giant in focus. These include Communication Services Select Sector SPDR Fund XLC, Fidelity MSCI Communication Services Index ETF FCOM, Vanguard Communication Services ETF VOX, iShares Global Comm Services ETF IXP and Global X Social Media Index ETF SOCL.
Earnings in Focus
Adjusted earnings per share came in at $4.71, topping the Zacks Consensus Estimate of $4.32 and increasing from the year-ago earnings of $2.64. Revenues grew 27% year over year to $36.46 billion and came above the estimated $36.28 billion. Advertising revenues, which account for the majority of Meta’s business, jumped 27% to $35.64 billion.
Meta Platforms’ global daily active users on at least one of the Family of services (Facebook, WhatsApp, Instagram or Messenger) increased 7% year over year to 3.24 billion as of March (see: all the Communication ETFs here).
The world’s largest social media platform expects to post revenues in the range of $36.5-$39 billion for the second quarter. The Zacks Consensus Estimate is pegged at $38.54 billion.
Meta revealed that it will spend billions of dollars more than expected this year, fueled by investments in artificial intelligence. It raised its capital expenditure guidance to $35-$40 billion for this year from the earlier projection of $30-$37 billion and expects to increase it next year as well. The company also expects 2024 total expenses to be in the range of $96-99 billion, up from the prior outlook of $94-99 billion due to higher infrastructure and legal costs.
The stock is up about 40% so far this year after almost tripling last year.
ETFs in Focus
Communication Services Select Sector SPDR Fund (XLC)
Communication Services Select Sector SPDR Fund offers exposure to companies from telecommunication services, media, entertainment and interactive media & services and has accumulated $17.4 billion in its asset base. It follows the Communication Services Select Sector Index and holds 22 stocks in its basket, with Meta Platforms occupying the top position at 23.3% share. About 49.2% of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two (read: Communication ETF Hits a New 52-Week High).
Communication Services Select Sector SPDR Fund charges 9 bps in annual fees and trades in an average daily volume of 6 million shares. It has a Zacks ETF Rank #1 (Strong Buy).
Fidelity MSCI Communication Services Index ETF (FCOM)
Fidelity MSCI Communication Services Index ETF follows the MSCI USA IMI Communication Services 25/50 Index. It holds 110 stocks in its basket, with Meta Platforms occupying the top position at 27.8%.
Fidelity MSCI Communication Services Index ETF has amassed $1 billion in its asset base and trades in an average daily volume of 104,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Make Your ETF Portfolio AI-Rich in Buffett-Like Manner).
Vanguard Communication Services ETF (VOX)
Vanguard Communication Services ETF also targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 116 stocks in its basket, Meta Platform takes the top spot with a 22.4% share. Interactive media & services is the top sector, accounting for 51.1% of the portfolio, while movies & entertainment, cable & satellite, and integrated telecommunication services round off the next three.
Vanguard Communication Services ETF has AUM of $4 billion and trades in a good volume of 146,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook.
iShares Global Comm Services ETF (IXP)
iShares Global Comm Services 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 65 stocks in its basket, with Meta Platforms taking the top spot at 21.6% share. Interactive media & services dominates the fund’s return at 55.4%, followed by integrated telecommunication services (16.1%).
iShares Global Comm Services ETF has amassed $268.4 million in its asset base while trading at an average daily volume of 14,000 shares. The expense ratio is 0.42%. IXP has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Global X Social Media Index ETF (SOCL)
Global X Social Media Index ETF provides investors access to social media companies around the world and has amassed $136.2 million in its asset base. It tracks the Solactive Social Media Total Return Index, holding 45 securities in the basket. Meta Platforms occupies the second position with 10.1% of the assets.
Global X Social Media Index ETF charges 0.65% in annual fees and sees lower trading volumes of roughly 11,000 shares a day. The fund has a Zacks ETF Rank #3 with a High risk outlook.
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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
Meta Platforms, Inc. (META) : Free Stock Analysis Report
