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Twitter Surges on Q3 Results: Log in to These ETFs

The social media space is likely to be on fire post Twitter Inc.’s TWTR third-quarter 2017 earnings release. The stock soared more than 18% in the key trading session on Oct 26 as the micro-blogging website beat on the bottom line, reported considerable monthly active users and said “it may become profitable for the first time next quarter.” Notably, the social media company has been a drag for long (read: Social Media ETF Nosedives With Twitter's Weak User Growth).

Results in Detail

Twitter’s Non-GAAP earnings per share of 10 cents came in much ahead of the Zacks Consensus Estimate of 6 cents per share. Revenues of $590 million were in line with the consensus mark.

Average monthly active users (MAU) were 330 million for the quarter, up 4% year over year and 1% sequentially. The figure matched analysts’ expectations. There has been an adjustment of 1-2 million users per quarter since the fourth quarter of 2016 due to miscalculation, added Twitter.

In the U.S., MAU grew 4% year over year and 2% sequentially. Improvement was also noticed in MAU on the international front. Daily active user growth was 14% in the third quarter.

Market Impact

Improvement in MAU and an earnings beat boosted investor sentiment as the stock added 18.5% in the key trading session following the release of earnings. Year to date (as of Oct 27, 2017), the stock is up about 23.5%. Twitter has a Zacks Rank #3 (Hold) at the time of writing.

The stock is a good growth play with a Zacks Style Score of A, but lacks value quotient as indicated by the score of D. The stock has a Momentum Score of B. Overall, there is a high chance that Twitter stock may perform well in the coming trading sessions, especially given the Zacks Industry Rank in the top 42% (see all technology ETFs here).

How Will Social Media ETF React Ahead?

Twitter’s results make it important for us to have a look at the social media ETF Global X Social Media ETF SOCL. Twitter takes about 9.95% of SOCL, holding the second position. As a result, the company’s results are crucial to the entire social media sector. The fund was up more than 1.5% on Oct 26, the day Twitter came up with Q3 earnings.

The product charges 65 bps in annual fees. The fund is up about 12% so far this year (as of Oct 26, 2017). SOCL has company-specific concentration risk, putting more than 60% investments in its top 10 holdings. At the current level, SOCL carries a Zacks ETF Rank #1 (Strong Buy) with a High-risk outlook (read: 5 Hottest Tech ETFs of 2017).

Investors should also note that Twitter shares occupy about 5.1% in ARK Innovation ETF ARKK. The fund charges 75 bps in fees. ARKK was up about 1.4% on Oct 26 (read: ETFs Riding High On Bitcoin Surge).

The in-focus Twitter takes the third spot of thefund ARK Web x.0 ETF ARKW with about 4.76% exposure. The fund charges 75 bps in fees. The social-media company takes about 2.85% of First Trust Dow Jones Internet Index Fund FDN (read: eBay vs. PayPal ETFs: The Story After Spin Off).

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Twitter, Inc. (TWTR): Free Stock Analysis Report
 
FT-DJ INTRNT IX (FDN): ETF Research Reports
 
GLBL-X SOCL MDA (SOCL): ETF Research Reports
 
ARK- WEB XO ETF (ARKW): ETF Research Reports
 
ARK-INNOVATION (ARKK): ETF Research Reports
 
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