Google to Drag on Tech ETFs

Includes: FDN, IYW, PNQI, VGT, XLK
by: Tom Lydon
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Google (NasdaqGS: GOOG) shares were set to weigh on technology and Internet exchange traded funds (ETFs) on Friday. The stock was down more than 5% before the bell after the company reported weaker-than-expected quarterly results.

Google’s profit and revenue increased, but investors were concerned about a rise in spending at the search engine and advertising giant.

Google shares dropped in after-hours trading Thursday as the earnings miss fueled anxiety that Google co-founder Larry Page, who returned as chief executive two weeks ago, will not meet Wall Street expectations as consistently as his predecessor, longtime CEO Eric Schmidt, reports Jessica Guynn for The Los Angeles Times.

“Google reported strong top-line growth with net revenue up 29% year-over-year,” said analysts at Benchmark Co. in a research note Friday.

“However, expenses outpaced revenue growth with total operating expense up 47% year-over-year. Under new CEO Larry Page, Google is investing heavily to drive future growth, with an emphasis on social,” they added.

“While uncertainty around margin erosion likely weighs on the stock, we believe the stock offers investors quality growth at a reasonable price,” said Benchmark analysts, who have a buy rating on Google and a $700 target price on the shares.

Some tech ETFs and their weightings in Google:

  • Technology Select Sector SPDR (NYSEArca: XLK) Google 5.7%
  • iShares Dow Jones US Technology ETF (NYSEArca: IYW) Google 6.4%
  • Vanguard Information Technology (NYSEArca: VGT) Google 5.6%

Internet ETFs:

  • First Trust Dow Jones Internet Index fund (NYSEArca: FDN) Google is top holding at 9.4%
  • PowerShares NASDAQ Internet Portfolio (NYSEArca: PNQI)

Technology Select Sector SPDR

Tisha Guerrero contributed to this article.