Social Media ETF Moving On Earnings
It has been a relatively rough year for social media. Some of the bigger names struggle to increase users while keeping expenses low, and some smaller companies simply didn’t last or were taken over by the industry giants. The fight for market share in the social media world is among the toughest out there.
The big names such as Facebook Inc (NASDAQ: FB), LinkedIn Corp (NYSE: LNKD) and Twitter Inc (NYSE: TWTR) appear to be here to stay, but in the short term investors are nervous about the expenses these companies will incur as further global expansion and expensive new technology are crucial for continued success.
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Facebook posted third quarter earnings today that beat analysts estimates on revenue, increasing 59 percent year over year. Earnings per share came in at 33 cents, also beating the estimates. Despite the solid numbers, the stock fell 6 percent when the opening bell rang. The decline was likely due to the light fourth quarter guidance.
Founder Mark Zuckerberg and Facebook CFO Dave Wehner announced this morning their plan for Facebook over the next year which will include a hiring binge of high talent individuals as well as aggressively investing in new technology; possibly increasing expenses as much as 70 percent.
As Facebook sets its self up for solid long-term growth, Wall Street gets nervous with the potential of increased spending.
Twitter has also struggled in the last couple days, after posting earnings and guidance that investors did not react to well. The company managed to increased revenue by 114 percent, but expenses tripled in large part due to increased compensation and acquisitions of smaller companies.
Twitter increased active monthly users by 23 percent year over year to 284 million, which many investors viewed as soft and a sign of slowing growth, causing the stock to slip almost 13 percent over the last two days.
Global X Social Media Index ETF (NYSE: SOCL)
A good way to capitalize on the growth of the social media industry over the long term is via the ETF SOCL, which tracks the largest publicly held social media companies around the word.
The ETF has 50 percent of its holdings in the United States and 28 percent in China. The top individual holdings as of October 28 included Facebook at 13.3 percent, LinkedIn Corp (NYSE: LNKD) at 11.7 percent and Tencent Holdings LTD at 11.5 percent of the portfolio. TWTR is the eight largest holding in the fund at 4.5 percent.
It has been a rough year for social media, and the ETF has lost 6 percent over the last 12 months. However, it is up 7 percent over the last six months.
Despite unfavorable numbers and a relatively mediocre short-term outlook for the world's biggest social media companies, the sector remains one of the fastest growing industries in the world. Many of these companies are here for the long haul and will continue to change the world as we know it for years to come.
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