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ETFs in Focus Ahead of Big Tech Q2 Earnings

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We are in the peak of the second-quarter earnings season and tech giants are in the spotlight this week. The five biggest tech players — Apple (AAPL - Free Report) , Amazon (AMZN - Free Report) , Meta Platforms (META - Free Report) , Alphabet (GOOGL - Free Report) and Microsoft (MSFT - Free Report) — set to report.

These five companies currently account for about 23% of the total market capitalization of the S&P 500 Index. Total Q2 earnings from the group of five companies are expected to be down 19.1% on revenue growth of 6.2%. This reflects a deceleration from the Q1 earnings decline of 8.4% and revenue growth of 11.4%. Being the undisputed leaders in the digital ad space, Alphabet and Meta will likely see a decline in advertising spending as the aggressive Fed tightening cycle takes effect.

The technology sector, which had been the hardest hit by soaring yields and a hawkish Fed, has shown some strength lately (read: Could a Sustained Tech ETF Rally Be in the Cards?).

Both Microsoft and Alphabet are scheduled to release their earnings on Jul 26, while Meta Platforms and Apple will report on Jul 27 and Jul 28, respectively. Amazon is also slated to report on Jul 28.

Microsoft

Microsoft has a Zacks Rank #3 (Hold) and an Earnings ESP of +0.47%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate indicates substantial earnings growth of 5.1% and revenue growth of 13.4% from the year-ago quarter. Microsoft’s earnings track is impressive, with the last four-quarter earnings surprise being 8.63%, on average. However, the stock witnessed negative earnings estimate revision of a penny for the to-be-reported quarter over the past seven days. Analysts decreasing estimates right before earnings — with the most up-to-date information possible — is not a good indicator for the stock. Microsoft belongs to a bottom-ranked Zacks industry (bottom 49%) and has lost about 8.6% over the past three months (see: all the Technology ETFs here).

Alphabet

Alphabet has a Zacks Rank #3 and an Earnings ESP of -0.03%. It saw a negative earnings estimate revision of a couple of cents over the past seven days for the to-be-reported quarter. The company’s earnings surprise track over the past four quarters is good, with the beat being 17.21%, on average. Earnings are expected to decline 5.9%, while revenues are expected to grow 13.2% from the year-ago quarter. Alphabet falls under a bottom-ranked Zacks industry (bottom 39%). The Internet behemoth has shed about 6% in the past three months.

Meta Platforms

Meta Platforms has a Zacks Rank #4 and an Earnings ESP of -4.26%. The social media giant saw a negative earnings estimate revision of 6 cents for the to-be-reported quarter over the past 30 days. The current Zacks Consensus Estimate for the yet-to-be reported quarter indicates a substantial year-over-year earnings decline of 30.5%. Revenues are expected to decrease a modest 0.9%. Meta Platforms delivered an earnings surprise of 5.99%, on average, in the last four quarters. The stock belongs to a bottom-ranked Zacks industry (bottom 46%). Shares of META have lost about 5% in the past three months.

Apple

Apple has a Zacks Rank #3 and an Earnings ESP of +0.88%. The stock saw no earnings estimate revision over the past 30 days for third-quarter fiscal 2022, and its earnings surprise history is strong. It delivered an earnings surprise of 11.85%, on average, over the past four quarters. Though Apple is expected to report a substantial earnings decline of 13.1% from the year-ago quarter, revenues are expected to increase 0.53% year over year. It belongs to a top-ranked Zacks industry (top 38%). The stock is down 2.3% in the past three-month timeframe.

Amazon

Amazon has a Zacks Rank #3 and an Earnings ESP of +34.09%. The stock saw a positive earnings estimate revision of a penny over the past 30 days for the second quarter. The Zacks Consensus Estimate represents a substantial year-over-year earnings decline of 80.3% and revenue growth of 5.9%. Amazon’s earnings surprise history is impressive, with an average beat of 138.98% for the last four quarters. The stock falls under a top-ranked Zacks industry (top 38%). The online e-commerce behemoth has witnessed a share price decrease of 12.4% in the past three months.

ETFs to Tap

Given this, investors may want to play these stocks with the help of ETFs. Below, we have highlighted six ETFs having the largest exposure to these tech giants.

MicroSectors FANG+ ETN (FNGS - Free Report) : This ETN is linked to the performance of the NYSE FANG+ Index, which is equal-dollar weighted and designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. The note accounts for a 10% share in each of the FAANG stocks and has a Zacks ETF Rank #3 (read: Tesla Mixed Q2 Earnings Put These ETFs in Focus).

Blue Chip Growth ETF (TCHP - Free Report) : This fund focuses on companies with leading market positions, seasoned management and strong financial fundamentals. It accounts for a combined 46.7% in the five firms.

Vanguard Mega Cap Growth ETF (MGK - Free Report) : This ETF offers exposure to the largest growth stocks in the U.S. market and has a Zacks ETF Rank #2. The five firms account for a combined 43.2% share in the basket.

iShares Evolved U.S. Technology ETF (IETC - Free Report) : This fund employs data science techniques to identify companies with exposure to the technology sector. The five firms account for a combined 41.9% share in the basket.

Invesco QQQ (QQQ - Free Report) : This ETF focuses on 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. This fund makes up for 36.5% share in the in-focus firms and has a Zacks ETF Rank #3 with a Medium risk outlook.

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