Familiar Names Could Carry the Day for This Internet ETF

The ALPS O’Shares Global Internet Giants ETF (OGIG) has delivered a 16.61% year-to-date return, reflecting broad strength in internet stocks despite some underperformance from major constituents like Alphabet and Amazon. While Alphabet faces AI-related concerns, Citi remains constructive on its YouTube and AI offerings, raising future revenue forecasts and price targets. Amazon is poised for potential short-term catalysts from Prime Day, with Bank of America projecting $21.4 billion in gross revenue, and its upcoming Q2 earnings. Additionally, Meta Platforms continues to be viewed as a robust advertising platform, and AppLovin's potential S&P 500 inclusion could further bolster the ETF, indicating ongoing tailwinds for the sector.

Analysis

The ALPS O’Shares Global Internet Giants ETF (OGIG) has posted a strong 16.61% year-to-date return, indicating broad-based strength within the internet sector that has overcome the weak performance of some marquee constituents. Notably, two major holdings, Alphabet (GOOGL) and Amazon (AMZN), which together account for over 10% of the ETF's weight, have significantly lagged, with GOOGL down 6.61% and AMZN up a mere 1.68% year-to-date. Despite this drag, the ETF's outlook is supported by multiple potential catalysts. Citi analysts have raised revenue forecasts for Alphabet for fiscal years 2025 and 2026 by 1.3% and 2.1% respectively, increasing their price target to $203 based on optimism for YouTube ads and its AI offerings. Amazon faces near-term catalysts with its Prime Day event, which Bank of America projects could generate $21.4 billion in gross revenue (a 60% year-over-year increase), and its Q2 earnings report on July 31. Further momentum for OGIG is supported by constructive analyst views on Meta Platforms (META) as a premier advertising platform and speculation that smaller component AppLovin (APP) will be added to the S&P 500.

Key Decisions for Investors

• Investors holding OGIG should recognize its resilience, as the ETF's 16.61% YTD gain demonstrates that its performance is not solely dependent on its largest cap components like Amazon and Alphabet.
• Monitor Amazon's upcoming Q2 earnings on July 31 and Prime Day sales figures, as positive results could catalyze a short-term rally in the stock and provide a significant boost to the ETF given its weighting.
• For those evaluating Alphabet, the key is to look beyond near-term AI threats to its search business and focus on the growth potential in its YouTube and proprietary AI offerings, as reflected in Citi's upgraded revenue forecasts and price target.
• Consider the potential upside from non-core drivers within the ETF, such as the speculative S&P 500 inclusion of AppLovin, which could provide an idiosyncratic lift to the fund's value.