Google-parent Alphabet GOOGL recently reported second-quarter 2020 results, with earnings and revenues topping estimates but declining on a year-over-year basis. Shares of Alphabet have lost as much as 3.6% since the release on Jul 30.
Earnings at a Glance
Earnings per share were $10.13, beating the Zacks Consensus Estimate of $8.43 and increasing 2.6% sequentially but decreasing 28.7% year over year. Net revenues, excluding total traffic acquisition cost or TAC (TAC is the portion of revenues shared with Google’s partners, and amount paid to distribution partners and others who direct traffic to the Google website), came in at $31.60 billion, declining 6.2% sequentially and 0.3% year over year. Net revenues surpassed the Zacks Consensus Estimate by 3.3% largely on support from strong performances by the company’s cloud and YouTube businesses amid the coronavirus crisis.
Beginning fourth-quarter 2019, Alphabet disaggregated its revenue segments on a more detailed basis, including Search, YouTube ads and Cloud. Revenues from Google-owned and partner sites within the search business declined 7.8% and 9.8% year over year, accounting for 65.6% and 12.4% of quarterly revenues, respectively. This resulted in a year-over-year decrease of 8.1% in total advertising revenues. YouTube revenues increased 5.8% year over year to $3.8 billion, accounting for 10% of quarterly revenues. Google other revenues — which consists of YouTube non-advertising revenues — were $5.1 billion for the second quarter, up 25.6% year over year. Moreover, Google cloud grew 43.2% year over year to $3.0 billion, making for 7.9% of quarterly revenues.
Meanwhile, TAC was down 10.2% sequentially and 7.5% year over year.
ETFs in Focus
The earnings results might have a huge impact on ETFs that are heavily invested in this Internet giant. Below we have highlighted four ETFs with double-digit exposure to Alphabet (see: all the Technology ETFs here).
Vanguard Communication Services ETF VOX
This fund targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 115 stocks in its basket, Alphabet takes the second and third spots with 11.4% and 11.2% share. VOX has AUM of $2.65 billion and charges 10 bps in annual fees. The fund has a Zacks ETF Rank #2 (Buy), with a Medium-risk outlook. The fund has gained around 1.4% since Alphabet’s earnings release (read: Facebook Q2 Earnings Beat Estimates: ETFs Set to Soar).
Fidelity MSCI Communication Services Index ETF FCOM
This fund follows the MSCI USA IMI Communication Services 25/50 Index. It holds 101 stocks in its basket, with Alphabet occupying the second and third positions at 10.8% and 10.5%. The product has amassed $581.9 million in its asset base and charges 8 bps in annual fees. It has a Zacks ETF Rank #2, with a Medium-risk outlook. The fund has gained around 1.5% since the earnings release (read: Missed the Big Five Tech Rally? Buy the Dip With These ETFs).
The Communication Services Select Sector SPDR Fund XLC
This ETF tracks the communication services sector of the S&P 500 Index and has accumulated $10.19 billion in its asset base. It follows the Communication Services Select Sector Index and holds 26 stocks in its basket, with Alphabet Inc. Class A and Alphabet Inc. Class C occupying the second and third positions with 11.4% and 11% weights, respectively. The product charges 13 bps in annual fees. It has a Zacks ETF Rank #1 (Strong Buy). The fund has gained around 1.5% since the earnings release (read: Back-to-School 2020: Another Driver of Tech ETF Rally).
iShares Global Comm Services ETF IXP
This 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 70 stocks in its basket, with Alphabet Inc. Class A and Alphabet Inc. Class C occupying the second and third positions with 10.5% and 10.2% weights, respectively. The fund has amassed $311.9 million in its asset base. Expense ratio came in at 0.46%. IXP has a Zacks ETF Rank #3 (Hold), with a Medium-risk outlook. The fund has gained around 0.7% since the earnings release.
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