Scalper1 News
The social media space, once a rising star, is seeing tough times for the last three months as evident by 6.3% loss incurred by the pure-play ETF Global X Social Media Index ETF (NASDAQ: SOCL ). The fund started the year on a solid note as the tech space soared but offhand Q1 earnings by some its components caught the fund off guard. This makes it more important for investors to keep a close watch on the Q2 earnings performance by the constituent companies and see what’s in store for SOCL in the coming days. Below we highlighted some key companies’ earnings this season and its impact on the fund. Results in Detail On July 30, professional networking giant LinkedIn Corporation (NYSE: LNKD ) beat the Zacks Consensus Estimate beat on earnings and revenues. However, investors dumped LNKD shares post results on a weak third-quarter revenue outlook. LinkedIn expects revenues within $745-$750 million while the Zacks Consensus Estimate was pegged at $750 million before earnings. But the company raised its full-year revenue expectation to $2.94 billion from $2.90 billion. Non-GAAP earnings per share for 2015 are projected at $2.19 per share compared with the previous guidance of $1.90 per share. Notably, LinkedIn is SOCL’s third-largest holding with 8.18% focus and has considerable power to make or break this ETF. On July 29, the social media giant Facebook (NASDAQ: FB ) reported a mixed-bag with an earnings miss and a revenue beat. Though revenues grew 39% in the quarter, the rate of growth was slower, marking the fifth straight quarter of deceleration. Higher expenses and growing concerns over slower revenue growth weighed on the Facebook stock and investors hurried to sell FB shares post earnings. Facebook has as much as 12.82% weight and the top spot in the fund SOCL. In July, Yahoo’s (NASDAQ: YHOO ) second-quarter adjusted numbers missed the Zacks Consensus Estimate, but its net revenue was higher than the Zacks Consensus Estimate. However, the company’s turnaround trends are solid. YHOO has a position in SOCL’s top 10 holdings with about 4.19% weight. In mid July, Google Inc. (NASDAQ: GOOGL ) (NASDAQ: GOOG ), the world’s biggest Internet search engine, stirred up investors with upbeat Q2 results. The stock soared 16.3% the day after it reported earnings. Google has 6.5% weight in SOCL, occupying the fifth position. On August 7, 2015, Groupon’s (NASDAQ: GRPN ) second-quarter top and bottom line missed our estimates. Also, the company projects revenues for the third in the range of $700-$750 million which fell short of the analysts’ expectation. As a result, the shares slumped 5.34% at the close of August 7. The company has 3.17% weight in the social media ETF. Twitter (NYSE: TWTR ) also reported last month. A deceleration in monthly user growth and a slightly soft Q3 guidance prompted investors to stay away from the Twitter stock although the company beat on the top and the bottom lines. The stock crashed post earnings. Early this month, Twitter hit a fresh low. However, SOCL has a meager percentage in with about 2.78%. ETF Perspective In such a backdrop, we would suggest investors to take a cautious approach on investing in the social media space as strength and weakness weigh almost the same. The recent stretch of huge sell-off in some components may be the result of overvaluation. Adding TWTR, FB or GRPN to one’s portfolio might not be a safe idea right now, but having a basket approach via SOCL – a pure play social media ETF – might be a smart move as far as risk minimization is concerned. SOCL has a Zacks ETF Rank of 3 or ‘Hold’ rating with a ‘High’ risk outlook and can protect the money of investors (interested in playing the social media space at the current level). This would also mitigate risks that the laggards bear. SOCL focuses on global companies engaged in some aspect of the social media industry. The fund tracks Solactive Social Media Index and invests $82.8 million of assets in 32 holdings. SOCL has company-specific concentration risk, putting more than 60% of investments in its top 10 holdings. The product charges 65 bps in annual fees. SOCL is up about 4% so far this year. Original Post Scalper1 News
Scalper1 News