AN EXCHANGE-TRADED fund (ETF) recovering from an all-time low in June is now in the red thanks to Snap's lacklustre earnings report.
The US$506 million Roundhill Ball Metaverse ETF (ticker METV) is falling in lockstep with Snap. METV has the largest portfolio allocation of Snap out of any ETF in the US, according to Bloomberg data. The social media company makes up 5.6 per cent of METV's total holdings. On Friday, the ETF tumbled more than 6 per cent, after rising 12 per cent from its low on Jun 16.
Snap posted disappointing second-quarter sales, roiled by a major slowdown in ad spending and rising competition for dwindling marketing dollars, on Thursday (Jul 21). The results sent shares plunging 36 per cent to its lowest level in more than 2 years. Snap dragged other social media companies like Meta Platforms METV's fourth-biggest holding, down Friday.
METV's 3 largest holdings - Roblox, Nvidia and Apple - are all trading lower.
But it's not all that bad, James Seyffart, ETF analyst at Bloomberg Intelligence, said. Snap is down almost 40 per cent from Thursday's close but METV is down far less due to the other 40 stocks the fund holds, he said.
"This highlights the benefits of diversification and diversified ETFs," he said.
Although it's been a tough environment for tech companies focused on the metaverse, genomes and robotics, they are all still poised for huge growth, Tom Hainlin, national investment strategist at US Bank Wealth Management, said.
"In the near term, you've got a Federal Reserve combating inflation and tightening monetary conditions that can impact access to and cost of capital as well as companies' willingness to invest and spend money on advertising due to the uncertain growth outlook," Hainlin said in a phone interview. "It's not surprising to us that the near-term performance has been pretty challenged, both as a collection and at the individual company level."
Other ETFs with significant portfolio allocations of Snap, ProShares On-Demand ETF (OND) and Global X Social Media ETF (SOCL), are down about 2 per cent and 5 per cent, respectively. BLOOMBERG