ETFs To Watch On, Inc. Earnings Miss

amazonThe online e-commerce behemoth (NASDAQ:AMZN) reported lackluster Q4 results after the market closed yesterday. The company missed our estimates on both the top and the bottom line, dampening investor sentiment.

Earnings per share came in at 51 cents. Though earnings more than doubled the prior-year level of 21 cents, it fell well short of the Zacks Consensus Estimate of 71 cents. Revenues climbed 20% year over year to $25.59 billion but missed the Zacks Consensus Estimate of $26.05 billion.

The sluggish performance was mainly due to weak revenue growth in the international market and higher holiday shipping costs. Notably, international sales slowed to 13% in Q4 from 21% in the year-ago quarter.

The company expects revenues to grow 13%–24% to the range of $18.2–$19.9 billion for the first quarter. The high end is above our current estimate of $19.7 billion, suggesting optimism in the AMZN growth story.

Amazon is planning to increase the annual price of its popular service – Amazon Prime – by $20 to $40 to meet rising fuel and other shipping cost. Currently, the service charges $79 per year from customers.

This hike would be the first in nine years and could boost the company’s profitability going forward. However, the risk of moderating subscription renewals at a higher price could be a drag on subscriber growth.

Market Impact

Based on the lower-than-expected numbers, AMZN shares tumbled as much as 13% in after hour trading on Thursday. However, the shares recovered sharply after the company revealed its plan to raise the Amazon Prime price. The stock is down nearly 4.5% at the close of after hour trading, while it was around the $370/share mark in early Friday morning trading.

ETF Angle

The roller-coaster ride puts some ETFs having higher allocation to this Internet giant in focus for the coming days. Investors should closely monitor the movement of these funds and take opportunity of any recovery in the AMZN price (see: all the Technology ETFs here).

This is especially true given that AMZN currently has a Zacks Rank #2 (Buy) and a solid Zacks Industry Rank in the top 39%. This adds to the bullish outlook and suggests good trading ahead.

Market Vectors Retail ETF (NYSEARCA:RTH)

This fund provides exposure to the 26 largest retail firms by tracking the Market Vectors U.S. Listed Retail 25 Index. Of these, AMZN takes the top spot at 8.86%.

The ETF has a certain tilt toward growth stocks, accounting for more than half of the portfolio, while sector wise, specialty retail has one-third of the share (read:Beat the Cold Weather with These Hot Sector ETFs).

The product has amassed $38.3 million in its asset base and charges 35 bps in annual fees. Volume is moderate as it exchanges nearly 52,000 shares per day. RTH is down over 5% in the year-to-date time frame and has room for upside given the Zacks ETF Rank of 2 or ‘Buy’ rating with a ‘Low’ risk outlook.

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