Google to Reportedly Acquire Wiz: ETFs in Focus
According to a report from the Wall Street Journal, Google’s parent company Alphabet GOOGL is reportedly in talks to acquire cyber security startup Wiz for $23 billion. This potential acquisition would be Google's largest ever and significantly boost its cloud computing capabilities.
The potential deal has put ETFs with a substantial allocation to Alphabet in focus. These include Communication Services Select Sector SPDR Fund XLC, Vanguard Communication Services ETF VOX, Fidelity MSCI Communication Services Index ETF FCOM, iShares Global Comm Services ETF IXP and MicroSectors FANG+ ETN FNGS.
Wiz, an Israeli startup founded in 2020, is one of the fastest-growing start-ups in the cloud security arena and has been positioning itself as a platform provider versus leaders Palo Alto Networks PANW, Zscaler ZS and others (read: Tech Sector Dominates First-Half Rally: 5 Best ETFs).
The potential deal highlights Alphabet's strategic focus on enhancing its cybersecurity portfolio amid increasing competition in the tech industry. It would boost Google's cloud-computing business, which lags behind Amazon.com (AMZN) unit Amazon Web Services as well as Microsoft (MSFT). Offering an all-in-one approach to cloud security, Wiz relies on ingesting data from various cloud platforms, including Amazon Web Services, Microsoft Azure, and Google Cloud, and then scanning it all for security risk factors.
Alphabet executives see the deal as a way to fortify Google’s cloud business, which grew 28% to $9.57 billion in the first quarter of this year. However, an agreement hasn’t been reached yet, and talks may fall apart.
ETFs in Focus
Let’s delve into each ETF below:
Communication Services Select Sector SPDR Fund (XLC)
Communication Services Select Sector SPDR Fund offers exposure to companies from telecommunication services, media, entertainment and interactive media & services and has accumulated $19.6 billion in its asset base. It follows the Communication Services Select Sector Index and holds 22 stocks in its basket, with Alphabet Class A and C shares occupying the second and third position, respectively, with a combined 23.4% share. About 47% of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two (read: Communication Services ETF Hits New 52-Week High).
Communication Services Select Sector SPDR Fund charges 9 bps in annual fees and trades in an average daily volume of 3.2 million shares. It has a Zacks ETF Rank #2 (Buy).
Vanguard Communication Services ETF (VOX)
Vanguard Communication Services ETF targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. Holding 117 stocks in its basket, both Alphabet Class A and C shares take the second and third spots, with a total of 22.2% of the portfolio. Interactive media & services is the top sector, accounting for 51.1% of the portfolio, while movies & entertainment, cable & satellite and integrated telecommunication services round off the next three.
Vanguard Communication Services ETF has AUM of $4.1 billion and trades in a good volume of 135,000 shares a day, on average. It charges 10 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Fidelity MSCI Communication Services Index ETF (FCOM)
Fidelity MSCI Communication Services Index ETF follows the MSCI USA IMI Communication Services 25/50 Index. It holds 108 stocks in its basket, with Alphabet Class A and C shares occupying the second and third positions, respectively, at a combined 22.1%.
Fidelity MSCI Communication Services Index ETF has amassed $1.2 billion in its asset base and trades in an average daily volume of 67,000 shares. It charges 8 bps in annual fees and has a Zacks ETF Rank #3 with a Medium risk outlook.
iShares Global Comm Services ETF (IXP)
iShares Global Comm Services ETF provides global exposure to companies in media, entertainment, social media, search engine, video/gaming and telecommunication services by tracking the S&P Global 1200 Communication Services 4.5/22.5/45 Capped Index. It holds 65 stocks in its basket, with Alphabet Class A and C shares taking the second and third spot, respectively, at 22.8%. Interactive media & services dominates the fund’s return at 51.8%, followed by integrated telecommunication services (17.7%).
iShares Global Comm Services ETF has amassed $443 million in its asset base while trading at an average daily volume of 20,000 shares. The expense ratio comes in at 0.42%. IXP has a Zacks ETF Rank #3 with a Medium risk outlook.
MicroSectors FANG+ ETN (FNGS)
MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is equal-dollar weighted, designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 equal-weighted stocks in its basket, with Alphabet accounting for a 10.2% share (read: Can Mega-Cap Tech's AI Boom Continue in 2H24?).
MicroSectors FANG+ ETN has accumulated $383.6 million in its asset base and charges 58 bps in annual fees. It trades in an average daily volume of 124,000 shares and has a Zacks ETF Rank #3.
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Palo Alto Networks, Inc. (PANW) : Free Stock Analysis Report
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
Vanguard Communication Services ETF (VOX): ETF Research Reports
Fidelity MSCI Communication Services Index ETF (FCOM): ETF Research Reports
iShares Global Comm Services ETF (IXP): ETF Research Reports
Zscaler, Inc. (ZS) : Free Stock Analysis Report
Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports
MicroSectors FANG+ ETN (FNGS): ETF Research Reports