Facebook's (FB) - Get Facebook, Inc. Class A Report fourth-quarter results are likely to get increased focus on not just its ad load, but how powerful Instagram has become -- especially in light of the pending Snap IPO.
Instagram, owned by Facebook, has turned into an advertising behemoth on its own, but it's the pace of new features that is likely to be just as important.
In recent months, it's added disappearing videos, as well as Instagram Stories, copied from Snapchat's feature of the same name. Recent media reports have suggested that Instagram's Stories feature has been negatively impacting time spent on Snapchat, the lifeblood of social media.
With time spent continuing to grow on Instagram, it's no wonder the platform, which has more than 600 million monthly active users, had a strong quarter, according to Susquehanna analyst Shyam Patil.
"[O]ur checks suggest that [Instagram] had a strong 4Q and continues to increase as a percentage of the mix, and our checks anticipate solid growth in 2017, as this will be the first year that [Instagram] has been part of the annual planning cycle for marketers," Patil wrote in a note to clients.
In addition to Instagram, investors will also be looking to hear any updates on the monetization of Messenger, Oculus sales over the holidays and long-term plans for WhatsApp.
Analysts surveyed by Yahoo! Finance expect Facebook to earn $1.31 a share on $8.51 billion in revenue for the fourth quarter.
Over the past 12 months, shares of Facebook gained nearly 13% compared to the near 19% gain in the S&P 500.
Here are three ETFs that may benefit if investors like Facebook's fourth-quarter results.
Social Media Index ETF
JMP Securities analyst Ronald Josey expects 2017 to be focused on video. "While we expect Facebook to report 4Q16 results that are above our/consensus expectations based on a strong 4Q16 advertising environment, we are most focused on 2017 plans around video and live video expansion, potential for increased disclosure on Instagram as ad revenue ramps, and the beginnings of Messenger monetization as businesses increasingly adopt it as a platform for interacting with customers," Josey wrote ahead of earnings.
JMP has a market outperform rating on Facebook, along with a $165 price target.
First Trust Dow Jones Internet Index Fund
The $3.49 billion First Trust Dow Jones Internet Index Fund (FDN) - Get First Trust Dow Jones Internet Index Fund Report has Facebook make up 9.19% of its portfolio, charging investors an expense ratio of 0.57%.
Aegis Capital analyst Victor Anthony, who rates Facebook a buy, expects the company to beat his fourth-quarter estimates, led by strong ad checks. "We expect upside to our estimates on the back of mostly positive ad checks, strong MAUs and DAUs for core Facebook from our app tracker, and contribution from Instagram, which we estimate contributed at least 5 points to revenue growth," Anthony wrote ahead of earnings.
PowerShares NASDAQ Internet Portfolio ETF
Susquehanna's Patil noted that social advertising spend during the fourth-quarter was "largely in-line/modestly higher," meaning Facebook is likely to meet or beat estimates, but a significant outperformance is not likely. "We have also heard of weakness in specific areas, though outside of these pockets, trends were generally solid," Patil wrote to clients ahead of earnings.