Groupon Earnings and Twitter Sell-Off Hit Social Media ETF - ETF News And Commentary
08 Mai 2014 - 4:00PM
Zacks
It seems that the
Global X Social Media Index ETF
(
SOCL) has fallen on hard times. The fund started
the year on weak footing thanks to a massive sell-off in
momentum stocks. After that, many of its components like
Twitter (
TWTR)
and
LinkedIn Corp. (
LNKD)
came up with downbeat Q1 results (read: After LinkedIn's Slump,
Connect with the Social Media ETF?).
This is not the end either, as the losing momentum continued for
SOCL in recent trading. The widened loss incurred by
Groupon Inc.
(GRPN)
– another SOCL component – took a beating on the
fund. Along with Groupon, acute selling pressure in Twitter after
the company’s lockup period expired had a negative impact on the
fund.
Notably, Twitter plummeted 17.81% in Tuesday trading, pushing
shares to a fresh all-time low in intraday trading on Tuesday.
Meanwhile, Groupon fell 2.47% in the key trading session and fell
6.25% in after hours.
Events in Detail
Groupon’s loss per share of 4 cents bettered the Zacks Consensus
Estimate of 7 cents loss per share. However, the loss per share
widened on a year-over-year basis. Its revenues of $757.6
million (up about 26% year over year) also came ahead of the Zacks
Consensus Estimate of $734 million.
Per Wall Street Journal, Groupon’s transformation to an e-commerce
player from just a daily-deals site needs time. There was no
spark in the guidance as well.
The company expects its second-quarter adjusted earnings to come in
between a breakeven and 2 cents per share while revenues are guided
between $725 million and $775 million. Thomson Reuters' estimated 3
cents earnings per share for Q2 on $754 million revenues.
Coming to Twitter, insiders and early investors were allowed to
sell the company’s shares, leading to a new epidemic of share
sell-offs on an elevated level of volume.
This also reminds of bearish investors’ speculation that Twitter
would spur another round of worries on the overvaluation status of
the Internet stocks. Investors should note that, a few days back
Twitter was hit by sluggish user growth in its Q1 results (read:
Sell-Off in Social Media Stocks Puts SOCL ETF in Trouble).
Market Impact
Though TWTR fell out of SOCL’s top ten holdings in the wake of
extreme bearish sentiment in the company, intense selling pressure
in Twitter as well as Groupon has also punished SOCL as investors
felt skeptical over the entire social media space. The fund shed
about 3.78% yesterday (read: 3 Hit and Flop ETFs of April).
In such a backdrop, we would suggest investors to take a cautious
approach on investing in the social media space as all are not bad
reporters this season. In fact,
Facebook
(
FB) and
Yelp
(
YELP) came up with decent results ruling out an
outright bearish sentiment on this social media ETF.
In fact, this sell-off can be used as an opportunity to acquire
shares of SOCL at a compelling valuation. SOCL has a Zacks ETF Rank
of 2 or ‘Buy’ rating with a ‘High’ risk outlook.
SOCL in Focus
SOCL focuses on companies across the globe engaged in some aspect
of the social media industry. The fund tracks Solactive Social
Media Index and invests $128.3 million of assets in 27
holdings.
The in-focus Groupon takes the seventh spot in the fund accounting
for about 4.86% in the portfolio. 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 has lost nearly 17.6% year to date and while more volatility
is certainly ahead, there are plenty of solid companies in the
space, suggesting that an ETF approach may be the better way to
play the segment for now.
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GROUPON INC (GRPN): Free Stock Analysis Report
LINKEDIN CORP-A (LNKD): Free Stock Analysis Report
GLBL-X SOCL MDA (SOCL): ETF Research Reports
TWITTER INC (TWTR): Free Stock Analysis Report
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