3 ETFs to Watch Ahead of Amazon Earnings

The exchange-traded funds (ETFs) with the largest holdings of Amazon will certainly be ones to watch this week as the tech giant is set to report its first-quarter earnings on Thursday after the closing bell.

No longer is Amazon just an alternative for college students to find cheaper books online as the retail behemoth founded in 1994 has become a global powerhouse setting its sights on dominating other spaces, such as cloud computing and video streaming. Its market reach has made it a mover and shaker in U.S. equities and how well it does or doesn’t could certainly shift the tide this week and beyond.

Amazon is experimenting with other avenues for revenue and admittedly, founder and CEO of Amazon Jeff Bezos warned that this could lead to some bad bets–multimillion dollar ones at that.

“Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures,” Bezos said in his annual shareholder letter. “We will work hard to make them good bets, but not all good bets will ultimately pay out.”

So what is Wall Street expecting? According to estimates from FactSet, analysts foresee Amazon to earn $4.71 per share on $59.70 billion in revenue.

However, worries of the current late market cycle could be putting investors on pause when it comes to purchasing Amazon shares. Has the online retail giant become too big and too expensive for its own good?

Some analysts don’t think that’s the case.

“We own Amazon (stock), and in my opinion they are unbelievably undervalued. And I know you’re not going to hear that from everyone, but when you consider Amazon’s growth, it’s trading at a substantial discount to the S&P,” he said Thursday on CNBC’s “Trading Nation.”

“Now of course they have their e-commerce business, and that industry in particular is growing in the low double digits, but their cloud business is where it’s at. That’s high margin, it’s growing at over 40% per year, and it’s all recurring revenue. … Their ad business is ramping up, which is also high margin. They’re actually stealing ad dollars from Facebook and Google. And no one is even talking about them in the streaming wars,” he said.

Investors and traders will definitely want to keep tabs on the ETFs with the largest Amazon holdings if they’re looking to gain upside on an earnings beat or vice versa. Amazon’s guidance for the rest of the year will also be closely watched as an indicator for the retail sector and the consumer’s overall penchant for spending.

3 ETFs to Watch with Largest Amazon Holdings:

  1. Fidelity MSCI Consumer Discretionary Index ETF (FDIS)–24.82 percent: seeks to provide investment returns that correspond generally to the performance of the MSCI USA IMI Consumer Discretionary Index. The index represents the performance of the consumer discretionary sector in the U.S. equity market.
  2. Consumer Discret Sel Sect SPDR ETF (NYSEArca: XLY)–24.42 percent: seeks investment results that correspond to the price and yield performance of publicly traded equity securities of companies in the Consumer Discretionary Select Sector Index. The index includes securities of companies from the following industries: retail; hotels, restaurants and leisure; textiles, apparel and luxury goods; household durables; automobiles; auto components; distributors; leisure products; and diversified consumer services.
  3. ProShares Online Retail ETF (NYSEArca: ONLN)–23.95 percent: seeks investment results, before fees and expenses, that track the performance of the ProShares Online Retail Index. The index tracks retailers that principally sell online or through other non-store channels. The index uses a modified market-capitalization weighted approach, is rebalanced monthly and is reconstituted annually. Retailers may include U.S. and non-U.S. companies. To be eligible, retailers must: be classified as an online retailer, an e-commerce retailer, or an internet or direct marketing retailer, according to standard industry classification systems; have a market capitalization of at least $500 million; have a six-month daily average value traded of at least $1 million; and meet other requirements.

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