How to Ride on a Soaring Amazon With ETFs

E-commerce behemoth Amazon AMZN is burning hot lately with shares trading above $3,000 for the first time this week. The stock has gained 63% so far this year and nearly doubled from their mid-March lows. In fact, Amazon is on the forefront of surging interest in online shopping caused by the COVID-19 pandemic.

The company has been largely benefiting from investors’ shift to its online store, cloud computing services, digital media offerings and more amid the pandemic. The trend is likely to continue into the post-pandemic era according to many analysts. Amazon is expected to see a slew of price-target upgrades in the near future and could leap as high as $3,500 over the next 12 months (read: Q2 Earnings Likely To Plunge: Invest in These Sector ETFs).

Additionally, most analysts have raised expectations for second-quarter results as the COVID-19 retail shutdown continues to drive accelerated consumer adoption of online shopping. Analyst at Piper Sandler sees shares notching massive gains over the next few weeks given the continued surge in online shopping activity.

Solid Fundamentals

The stock has a Zacks Rank #2 (Buy) and Earnings ESP of +8.09%, indicating higher chances of beating estimates this quarter. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Amazon saw positive earnings estimate revision from $1.56 to $1.70 over the past 60 days for the to-be-reported quarter. This represents substantial year-over-year decline of 67.4%. Revenues are expected to grow 28% from the year-ago quarter. The online giant comes from a top-ranked Zacks industry (top 34%), suggesting strong upside for the stock over the coming days (see: all the Consumer Discretionary ETFs here).   

Given the bullish trends, investors could easily tap the opportune moment with some ETFs. Below, we have highlighted five ETFs that have at least 20% allocation to this Internet giant and could make for compelling plays heading into the second half of 2020:

Fidelity MSCI Consumer Discretionary Index ETF FDIS

This fund tracks the MSCI USA IMI Consumer Discretionary Index, holding 252 stocks in its basket. Of these, AMZN takes the top spot with 34.8% share. Internet & direct marketing retail makes up for the top sector with 40.7% share, followed by specialty retail (19.1%) and hotels restaurants & leisure (13.3%). The product has amassed $813.9 million in its asset base while trading in a good volume of around 165,000 shares a day on average. It charges 8 bps in annual fees from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: ETFs That Can Ride High on Improving Consumer Confidence).

ProShares Online Retail ETF ONLN

This ETF focuses on global retailers that derive significant revenues from online sales. It tracks the ProShares Online Retail Index, holding 24 stocks in its basket with Amazon as the top firm at 27% allocation. The product has amassed $192.1 million in its asset base and trades in paltry volume of around 59,000 shares a day on average. It charges 58 bps in annual fees from investors.

Consumer Discretionary Select Sector SPDR Fund XLY

This product offers exposure to the broad consumer discretionary space by tracking the Consumer Discretionary Select Sector Index. It is the largest and most-popular product in this space with AUM of nearly $13.4 billion and average daily volume of around 5.9 million shares. Holding 61 securities in its basket, Amazon takes the top spot with 25.3% of assets. Internet & direct marketing retail dominates 30.7% of the portfolio while specialty retail, and hotels restaurants and leisure round off the next two spots with a double-digit allocation each. The fund charges 0.13% in expense ratio and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Vanguard Consumer Discretionary ETF VCR

This fund follows the MSCI U.S. Investable Market Consumer Discretionary 25/50 Index and holds 296 stocks in its basket. Of these, Amazon occupies the top position with 22.8% allocation. Internet & direct marketing retail takes the largest share at 28.1% of assets, while home improvement retail and restaurants round off the top three sectors. VCR charges investors 10 bps in annual fees, while volume is moderate at nearly 122,000 shares a day. The product has about $3.2 billion in its asset base and a Zacks ETF Rank #3 with a Medium risk outlook (read: What’s in Store for Consumer Discretionary ETFs as Virus Spreads?).

VanEck Vectors Retail ETF RTH

This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. Of these, AMZN takes the top position in the basket with 20.9% share. The ETF has a certain tilt toward specialty retail, which accounts for 32% of the portfolio, while Internet & direct marketing retail (26%), hypermarkets (14%) and department stores (10%) round off the next spots. The product has amassed $117.8 million in its asset base and charges 35 bps in annual fees. Volume is light as it exchanges nearly 21,000 shares per day. RTH has a Zacks ETF Rank #2 with a Medium risk outlook.

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