Q3 FAANG Earnings Likely to be Solid: 5 ETFs to Play

The so-called FAANG stocks — Facebook FB, Amazon AMZN, Apple AAPL, Netflix NFLX and Alphabet GOOGL – which were once investors’ darling and the biggest driver of the nine-year bull run, were hit hard recently on investors’ cautious approach. In fact, this approach compelled them to shun growth stocks. Per Zacks, FAANG stocks have declined 9.3% on average over the past three months and 6.5% so far this month.

Streaming giant, Netflix, the first company in the FAANG group to report Q3 earnings on Oct 16, impressed investors as its shares soared as much as 15% in aftermarket hours following blockbuster earnings. This helped the FAANG group to regain momentum. The other four members are due to report this week and the next (read: FAANG ETFs Face Off Amid New Tariffs: Apple Vs. Amazon).

Facebook

Facebook is expected to release its earnings report on Oct 30 after market close. It has a Zacks Rank #3 (Hold) and an Earnings ESP of +1.07%. According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 when combined with a positive Earnings ESP of +1.07%. According to our methodology, a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 when combined with a positive Earnings ESP increases our chances of predicting an earnings beat, while a Zacks Rank #4 or 5 (Sell rated) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The social media giant has witnessed negative earnings estimate revision of a penny for the to-be-reported quarter over the past month, indicating year-over-year decline of 7.55%. However, Facebook has delivered positive earnings surprises in the last four quarters, with an average beat of 14.80%. Revenues are expected to grow 33.89% for the quarter. The stock has a solid Growth Score of B and belongs to a top-ranked Zacks industry (top 37%). Shares of FB have declined 26.9% in the past three months.

Amazon

Amazon, slated to report on Oct 25 after market close, has a Zacks Rank #2 and an Earnings ESP of +6.56%. The stock has seen positive earnings estimate revision of 4 cents over the past 30 days for the third quarter and the Zacks Consensus Estimate indicates a year-over-year increase of 30.23%. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a pretty good indicator for the stock.

Amazon’s earnings surprise history is also impressive, with a positive earnings surprise of 1,347.10% on average for the last four quarters. Additionally, the company is expected to report revenue growth of 30.23%. The stock has a top Growth Score of A and a solid Momentum Score of B. It falls under the top-ranked Zacks industry (top 32%). The online e-commerce behemoth has witnessed a drop of 2.2% over the past three months.

Apple

Apple has a Zacks Rank #2 and an Earnings ESP of +1.59%. There have been no earnings estimate revisions over the past 30 days but its earnings surprise history is strong. It has delivered an average positive earnings surprise of 5.46% over the past four quarters. Apple is expected to post substantial earnings growth of 33.82% and revenue growth of 16.79% in the fiscal fourth quarter. It boasts a solid Growth Score of B and Momentum Score of A. The stock belongs to a top-ranked Zacks Industry (top 22%) and has shed 14.4% over the past three months (read: Spread of ETFs to Taste Apple's Trillion Dollar Market Cap).

Alphabet

Alphabet has a Zacks Rank #3 and an Earnings ESP of -1.64%. It saw positive earnings estimate revision of four cents over the past seven days for the to-be-reported quarter. Additionally, its earnings surprise track over the past four quarters is good with an average beat of 10.38%. It sports a solid Growth Score of A and Momentum Score of B. The Internet behemoth falls under a top-ranked Zacks industry (top 37%) and has lost nearly 9% in the past three months. The company will report after the closing bell on Oct 25.

ETFs to Tap

Given the expected strong earnings, investors may want to invest in these stocks with the help of ETFs. Below, we have highlighted five ETFs having the largest exposure to FAANGs.

Invesco QQQ QQQ: This fund makes up for 38.4% share in FAANGs and has a Zacks ETF Rank #2.

iShares Evolved U.S. Technology ETF IETC: This fund accounts for 29.8% share in FAANG stocks.

iShares North American Tech ETF IGM: This product accounts for about 28.6% in FAANG group and has a Zacks ETF Rank #3 (read: Technology ETF Hits New 52-Week High).

iShares Russell 1000 Growth ETF IWF: This ETF allocates a combined 25.2% share in FAANG stocks and has a Zacks ETF Rank #1 (read: A Spread of Top-Ranked Growth ETFs Hitting All-Time Highs).

First Trust Cloud Computing ETF SKYY: This ETF has 20.3% allocation in FAANGs and has a Zacks ETF Rank #3.

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