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After the closing bell on Wednesday, the world's largest software maker Microsoft (MSFT - Free Report) delighted investors with stellar fiscal third-quarter 2019 results. It topped both revenue and earnings estimates.
Earnings per share came in at $1.14, outpacing the Zacks Consensus Estimate by 14 cents and improving 20% from the year-ago quarter. Revenues rose 14% year over year to $30.57 billion, topping the consensus estimate of $29.78 billion. The outperformance reflects the company’s success in shifting its business toward Internet-based computing, which includes products such as Office 365, Dynamic 365 and the flagship Azure computing platform. This has become a major source of growth (see: all the Technology ETFs here).
However, cloud computing business is witnessing a slowdown. Azure sales grew 73% in the fiscal third quarter, down from 76% growth in the previous quarter. Sales of Office 365 Commercial and Dynamic 365 climbed 30% and 43%, respectively.
Following the earnings announcement, shares of Microsoft jumped as much as 4.6% in after-market hours to touch the $1 trillion-market-cap level before trimming gains. It is also up more than 3% in early trading today at the time of writing.
Currently, Microsoft carries a Zacks Rank #2 (Buy) and has a VGM Score of C. It falls under a top-ranked Zacks industry (top 4%), which suggests that its outperformance is likely to continue in the days ahead.
ETFs in Focus
Investors seeking to bet on the strength of this software leader could definitely tap ETFs. While there are several ETF options available, we have highlighted six with double-digit exposure to Microsoft that could be compelling choices.
This most-popular technology ETF follows the Technology Select Sector Index and has $20.9 billion in AUM. The fund charges 13 bps in fees per year from investors and trades in heavy volume of around 16 million shares a day on average. It holds about 68 securities in its basket, with Microsoft occupying the top position at 18%. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Technology ETF Hits New 52-Week High).
This ETF tracks the Dow Jones US Technology Index, giving investors exposure to 149 technology stocks. Of these, Microsoft occupies the top position in the basket with 15.6% of the assets. The fund has AUM of $4.3 billion and charges 43 bps in fees and expenses. Volume is good as it exchanges nearly 214,000 shares a day. The fund has a Zacks ETF Rank #2 with a Medium risk outlook (read: U.S. Manufacturing Sector Grows in March: ETF & Stock Picks).
This fund manages about $21.2 billion in its asset base and provides exposure to 319 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here MSFT takes the second spot with 14.4% share. The ETF has 0.10% in expense ratio, while volume is solid at nearly 771,000 shares. It has a Zacks ETF Rank #1 with a Medium risk outlook.
This fund is home to 310 technology stocks with AUM of $2.4 billion. It follows the MSCI USA IMI Information Technology Index. MSFT is the second firm with a 14.4% allocation. The ETF has 0.08% in expense ratio, while volume is solid at 431,000 shares a day. It carries a Zacks ETF Rank #1 with a Medium risk outlook (read: Era of Commission-Free ETFs Knocking on Investors' Door?).
This product provides broad exposure to technology stocks from around the world by tracking the S&P Global 1200 Information Technology Sector Index. Holding 116 stocks in its basket, Microsoft occupies the top spot with 14.2% share. American firms dominate the fund’s portfolio at 78.8%. The ETF has amassed $2.6 billion in its asset base but trades in a good volume of 130,000 shares a day on average. Expense ratio came in at 0.47%.
This is an active ETF, having accumulated $7.3 million in its asset base so far. It employs data science techniques to provide exposure to 230 technology stocks. Microsoft is the top firm with 13.6% allocation. IETC trades in a light volume of 4,000 shares and charges 18 bps in annual fees (read: What's in the Cards for FAANG ETFs This Earnings Season?).
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ETFs to Buy on Microsoft's Blowout Q3 Earnings
After the closing bell on Wednesday, the world's largest software maker Microsoft (MSFT - Free Report) delighted investors with stellar fiscal third-quarter 2019 results. It topped both revenue and earnings estimates.
Earnings per share came in at $1.14, outpacing the Zacks Consensus Estimate by 14 cents and improving 20% from the year-ago quarter. Revenues rose 14% year over year to $30.57 billion, topping the consensus estimate of $29.78 billion. The outperformance reflects the company’s success in shifting its business toward Internet-based computing, which includes products such as Office 365, Dynamic 365 and the flagship Azure computing platform. This has become a major source of growth (see: all the Technology ETFs here).
However, cloud computing business is witnessing a slowdown. Azure sales grew 73% in the fiscal third quarter, down from 76% growth in the previous quarter. Sales of Office 365 Commercial and Dynamic 365 climbed 30% and 43%, respectively.
Following the earnings announcement, shares of Microsoft jumped as much as 4.6% in after-market hours to touch the $1 trillion-market-cap level before trimming gains. It is also up more than 3% in early trading today at the time of writing.
Currently, Microsoft carries a Zacks Rank #2 (Buy) and has a VGM Score of C. It falls under a top-ranked Zacks industry (top 4%), which suggests that its outperformance is likely to continue in the days ahead.
ETFs in Focus
Investors seeking to bet on the strength of this software leader could definitely tap ETFs. While there are several ETF options available, we have highlighted six with double-digit exposure to Microsoft that could be compelling choices.
Select Sector SPDR Technology ETF (XLK - Free Report)
This most-popular technology ETF follows the Technology Select Sector Index and has $20.9 billion in AUM. The fund charges 13 bps in fees per year from investors and trades in heavy volume of around 16 million shares a day on average. It holds about 68 securities in its basket, with Microsoft occupying the top position at 18%. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Technology ETF Hits New 52-Week High).
iShares Dow Jones US Technology ETF (IYW - Free Report)
This ETF tracks the Dow Jones US Technology Index, giving investors exposure to 149 technology stocks. Of these, Microsoft occupies the top position in the basket with 15.6% of the assets. The fund has AUM of $4.3 billion and charges 43 bps in fees and expenses. Volume is good as it exchanges nearly 214,000 shares a day. The fund has a Zacks ETF Rank #2 with a Medium risk outlook (read: U.S. Manufacturing Sector Grows in March: ETF & Stock Picks).
Vanguard Information Technology ETF (VGT - Free Report)
This fund manages about $21.2 billion in its asset base and provides exposure to 319 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here MSFT takes the second spot with 14.4% share. The ETF has 0.10% in expense ratio, while volume is solid at nearly 771,000 shares. It has a Zacks ETF Rank #1 with a Medium risk outlook.
MSCI Information Technology Index ETF (FTEC - Free Report)
This fund is home to 310 technology stocks with AUM of $2.4 billion. It follows the MSCI USA IMI Information Technology Index. MSFT is the second firm with a 14.4% allocation. The ETF has 0.08% in expense ratio, while volume is solid at 431,000 shares a day. It carries a Zacks ETF Rank #1 with a Medium risk outlook (read: Era of Commission-Free ETFs Knocking on Investors' Door?).
iShares Global Tech ETF (IXN - Free Report)
This product provides broad exposure to technology stocks from around the world by tracking the S&P Global 1200 Information Technology Sector Index. Holding 116 stocks in its basket, Microsoft occupies the top spot with 14.2% share. American firms dominate the fund’s portfolio at 78.8%. The ETF has amassed $2.6 billion in its asset base but trades in a good volume of 130,000 shares a day on average. Expense ratio came in at 0.47%.
iShares Evolved U.S. Technology ETF (IETC - Free Report)
This is an active ETF, having accumulated $7.3 million in its asset base so far. It employs data science techniques to provide exposure to 230 technology stocks. Microsoft is the top firm with 13.6% allocation. IETC trades in a light volume of 4,000 shares and charges 18 bps in annual fees (read: What's in the Cards for FAANG ETFs This Earnings Season?).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>