ETFs for Amazon Earnings
Amazon releases its first quarter earnings results today, and depending on how the results look, here are three ETF plays to consider.
Per usual, Apple (AAPL) dazzled when it delivered second-quarter earnings after the bell on Tuesday, but there's no rest for the weary in tech-land as e-commerce giant Amazon.com (AMZN) steps into the earnings confessional today after the close. Analysts expect Washington-based Amazon to post a first-quarter profit of $.07 per share on revenue of $12.9 billion. Operating income is expected to be $186 million.
While Amazon is no Apple when it comes to market cap, the company is still viewed as one of the e-commerce bellwethers. After disappointing investors with its fourth-quarter report, investors will be heavily scrutinizing the Q1 report and any guidance offered by Amazon.
Critical points to watch with Amazon are any signs Kindle sales are slowing, though Amazon doesn't break out sales for specific devices; the company's spending levels; and third-party sales. Trading at 76 times forward earnings and almost 5.5 times price-to-earnings growth, Amazon can ill afford another disappointing earnings update. Get ready for the pre- and post-earnings action with the following ETFs.
First Trust Dow Jones Internet Index Fund (FDN): Prior to Wednesday's Apple-induced run-up, First Trust Dow Jones Internet Index Fund had been in a bad way over the past months, tumbling 5% and violating a key uptrend line. That glum performance has led to about $26 million in outflows since we last visited the fund. On April 6, First Trust Dow Jones Internet Index Fund had $533 million in AUM. It closed with almost $507 million on Wednesday. Amazon accounts for 7.6% of First Trust Dow Jones Internet Index Fund's weight, not a huge weight, but the stock is First Trust Dow Jones Internet Index Fund's second-largest holding behind Google (GOOG). Amazon and First Trust Dow Jones Internet Index Fund have displayed a fairly tight correlation over the past month, so this earnings report could prove pivotal not only to the stock's near-term fortunes, but the ETF's as well.
Market Vectors Retail ETF (RTH): The Market Vectors Retail ETF is by no means obscure. Average daily volume of over 292,000 shares attests to that, but this ETF isn't usually thought of as a place to get Amazon exposure. Well, Amazon is Market Vectors Retail ETF's third-largest holding with a weight of 7.9%.
A bad report from Amazon could make an already, shall we say interesting, week even more so for Market Vectors Retail ETF. The ETF's top holding with an 11.6% allocation is Wal-Mart (WMT). As you might have heard, the world's largest retailer is having some problems south of the border.
PowerShares Nasdaq Internet Portfolio (PNQI): When we compared First Trust Dow Jones Internet Index Fund and the PowerShares Nasdaq Internet Portfolio on April 6, the latter's top-four holdings were Priceline (PCLN), Baidu (BIDU), Amazon, and Google. Amazon is still in the third spot, but eBay's (EBAY) recent surge has taken that stock into PowerShares Nasdaq Internet Portfolio's top spot.
eBay's bullishness aside, Baidu's recent slide has weighed on PowerShares Nasdaq Internet Portfolio and an after-hours tumble for Akamai Technologies (AKAM) on Wednesday combined with any selling pressure on Amazon in advance of its earnings report would present problems for PowerShares Nasdaq Internet Portfolio. Amazon, Baidu, and Akamai combine for about 20% of PowerShares Nasdaq Internet Portfolio's weight.
PowerShares Nasdaq Internet Portfolio is an ideal fund for playing momentum; just be sure to do that playing over the course of a few days or weeks. With average daily volume of less than 17,500 shares, PowerShares Nasdaq Internet Portfolio isn't the day traders' delight that some of its components are.
Editor's Note: This content was originally published on Benzinga.com by The ETF Professor.
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