ETFs to Watch as Amazon Shares Slip Following Q3 Earnings Miss
Shares of Amazon.com AMZN slipped 1.4% in the last trading session, recovering from a plunge of more than 6% in after-hours trading on Oct. 29, following the release of its third-quarter results. The tech giant’s rising free cash outflow marred the AWS unit’s fastest sales growth of 39.3% in nearly five years, a tension directly reflected in the stock’s volatility.
Amazon also failed to meet Wall Street’s expectations on both top and bottom-line fronts, further fueling investors’ skepticism.
Nevertheless, soaring sales growth in AMZN’s cloud segment, combined with a steady full-year capital expenditure outlook, offered a temporary breather to market participants, helping the stock recover some losses by Friday’s close.
While some investors might see this dip as an opportune moment to invest in Amazon stock, others wary of its growing free cash outflow might not want direct exposure.
For them, exchange-traded funds (ETFs) with Amazon among their top holdings offer a strategic middle ground. Exposure to such funds enables investors to capture AMZN’s upside while benefiting from a diversified basket of assets.
But before diving into the specifics of these ETFs, let us take a closer look at how the world’s largest e-commerce platform performed in the third quarter across other key metrics.
A Brief Analysis of AMZN’s Q3 Results
Amazon’s third-quarter earnings of $1.89 missed the consensus estimate by 6%. Sales missed the consensus mark by a whisker. On a year-over-year basis, the company’s earnings dropped 3.1%, while its sales grew 12%.
The company’s advertising business delivered solid growth in the third quarter, with revenues increasing 12% year over year.
Its grocery business is also delivering solid growth, with fresh groceries and everyday essentials growing about 3x faster than the rest of the store and representing about half of all units sold in the third quarter.
As customers continue migrating to the cloud and expanding their use of Amazon Web Services (“AWS”) core offerings, the segment’s annualized revenue run rate reached $184 billion at the end of the third quarter.
Beyond standard cloud infrastructure, Amazon’s custom silicon segment is gaining significant traction, posting triple-digit percentage revenue growth year over year. Revenue commitments for its proprietary Graviton and Trainium chips have surged more than 20-fold in the reported quarter compared to the prior-year period.
Amazon expects net sales for the fourth quarter to be in the band of $240-$247 billion, including an estimated 60 basis point foreign exchange headwind. The midpoint of this sales guidance, $243.5 billion, lies below the consensus estimate of $245.13 billion.
To this end, it is imperative to mention that Amazon expects fourth-quarter 2026 profitability to be impacted by Project Kuiper (Leo), as most initial production and launch costs will continue to be expensed during the quarter, contrary to its earlier expectations. Despite the expense timing, the commercial satellite service remains on track to launch initial operations before the end of the year.
Amazon-Heavy ETFs to Watch
VanEck Consumer Discretionary TruSector ETF TRUD
This fund, with net assets worth $88 million, offers exposure to five consumer discretionary-related companies. Of these, AMZN holds the second spot with 24.53% weight.
TRUD charges 16 basis points (bps) in fees. It traded at a volume of 0.04 million shares in the last trading session.
ProShares Online Retail ETF ONLN
This fund, with net assets worth $57.8 million, offers exposure to 24 online retail stocks. Of these, AMZN holds the first spot with a 22.64% weight.
ONLN charges 58 bps in fees. It traded at a volume of 0.01 million shares in the last trading session.
Roundhill Magnificent Seven ETF MAGS
This fund, with assets under management (AUM) worth $5.28 billion, offers exposure to the Magnificent Seven stocks. Of these, AMZN holds the fourth spot with a 14.45% weight.
MAGS charges 30 bps in fees. It traded at a good volume of 8.33 million shares in the last trading session.
Kurv Technology Titans Select ETF KQQQ
This fund, with net assets worth $121.5 million, includes high-conviction technology titans. Of these, AMZN holds the second spot with a 10.81% weight.
KQQQ charges 99 bps in fees. It traded at a volume of 0.09 million shares in the last trading session.
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This article originally published on Zacks Investment Research (zacks.com).