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5 Top-Ranked ETFs to Taste Apple's $2 Trillion Market Cap
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After beating badly on concerns over the COVID-19 crisis in March, Apple (AAPL - Free Report) rebounded strongly and even crossed the $2 trillion market cap in the last trading session. This has made the technology giant the first U.S. company to reach this level after more than doubling in five months. In fact, Apple shares have climbed about 59% so far this year compared to a 5% increase in the S&P 500.
The historic level comes after two years when the company hit a trillion-dollar valuation on Aug 2, 2018. Apple overtook Saudi Arabia’s state-owned oil company Saudi Aramco last month to become the world’s most valuable company. The stock now accounts for close to 7% of the S&P 500's total market value (read: Apple Tops Saudi Aramco As Most-Valued Company: ETFs in Focus).
The bullish trend is likely to continue with many analysts like Wedbush Securities and Deutsche Bank among others lifting their target price on the stock lately.
Inside The Future Growth Story
Though Apple’s smartphone market has saturated, Services revenues, which include iTunes, Apple Music, iCloud, Apple Pay and Apple Care, have been roaring higher. Notably, Service revenues jumped 14.8% year over year to $13.16 billion in the recently reported fiscal third quarter. Not only the main services, Apple TV+ and Apple Music, News+ and the gaming service Apple Arcade are also contributing to growth.
The iPhone maker is a beneficiary of the "stay-at-home" environment, with broad adoption of mobile Internet-connected devices, apps and other cloud services. Additionally, the company is set to launch bundled services for the subscription of news, music, games and fitness services at a discounted price to its subscribers by October along with the new 5G iPhone 12 and the launch of iOS 14.
The bundles will be dubbed “Apple One” and a basic package will include Apple Music and Apple TV+. A more expensive variation will have these two services and the Apple Arcade gaming service while the next tier will add Apple News+, followed by a pricier bundle with extra iCloud storage for files and photos. The company is also developing a new subscription for virtual fitness classes that can be used via an app for iPhone, iPad and Apple TV. This service will be offered in a higher-end bundle with the rest of Apple’s services.
The excitement over the stock split news has bolstered optimism, as it will make the stock more accessible to a broader base of investors. Apple announced a 4-for-1 stock split when it reported its third-quarter fiscal 2020 results. Apple shareholders at the close of trading on Aug 24 will receive three additional shares for each one they currently own. Post-split trading will begin on Aug 31. This is Apple's first stock split since 2014 (read: Apple ETFs to Buy on Blowout Q3 & Stock Split News).
Solid Fundamentals
Apple has seen rising earnings estimate revisions from $15.18 to $16.00 per share for the fiscal year (ending Sep 2021) over the past 90 days. This represents substantial year-over-year growth of 23.8%. Revenues are expected to grow 14.95%. The stock is cheap, trading at a P/E ratio of 35.81 compared with a few FAANG names — Amazon’s (AMZN - Free Report) 101.90 times and Netflix’s (NFLX - Free Report) 77.10 times.
Further, Apple currently carries a Zacks Rank #1 (Strong Buy) and boasts a top-ranked Zacks industry (top 8%), suggesting strong upside for the stock over the coming days (see: all the Technology ETFs here).
ETFs to Buy
Given this, investors seeking to tap the bullishness in the tech titan could consider the following ETFs. These funds have Apple as their top firm with a double-digit allocation and sport a Zacks Rank #1 (Strong Buy) with a Medium risk outlook.
This most-popular technology ETF has $35.1 billion in AUM and charges 13 bps in fees per year from investors. AAPL makes up for roughly 24.4% of assets.
This ETF provides investors exposure to technology stocks with 21.4% allocation in Apple. The fund has AUM of $6.2 billion and charges 42 bps in fees and expenses (read: S&P 500 Hits New Record Highs: Top-Ranked ETF Winners).
This ETF provides exposure to the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. Apple accounts for 13.7% share. It has AUM of $131.3 billion and charges 20 bps in annual fees.
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5 Top-Ranked ETFs to Taste Apple's $2 Trillion Market Cap
After beating badly on concerns over the COVID-19 crisis in March, Apple (AAPL - Free Report) rebounded strongly and even crossed the $2 trillion market cap in the last trading session. This has made the technology giant the first U.S. company to reach this level after more than doubling in five months. In fact, Apple shares have climbed about 59% so far this year compared to a 5% increase in the S&P 500.
The historic level comes after two years when the company hit a trillion-dollar valuation on Aug 2, 2018. Apple overtook Saudi Arabia’s state-owned oil company Saudi Aramco last month to become the world’s most valuable company. The stock now accounts for close to 7% of the S&P 500's total market value (read: Apple Tops Saudi Aramco As Most-Valued Company: ETFs in Focus).
The bullish trend is likely to continue with many analysts like Wedbush Securities and Deutsche Bank among others lifting their target price on the stock lately.
Inside The Future Growth Story
Though Apple’s smartphone market has saturated, Services revenues, which include iTunes, Apple Music, iCloud, Apple Pay and Apple Care, have been roaring higher. Notably, Service revenues jumped 14.8% year over year to $13.16 billion in the recently reported fiscal third quarter. Not only the main services, Apple TV+ and Apple Music, News+ and the gaming service Apple Arcade are also contributing to growth.
The iPhone maker is a beneficiary of the "stay-at-home" environment, with broad adoption of mobile Internet-connected devices, apps and other cloud services. Additionally, the company is set to launch bundled services for the subscription of news, music, games and fitness services at a discounted price to its subscribers by October along with the new 5G iPhone 12 and the launch of iOS 14.
The bundles will be dubbed “Apple One” and a basic package will include Apple Music and Apple TV+. A more expensive variation will have these two services and the Apple Arcade gaming service while the next tier will add Apple News+, followed by a pricier bundle with extra iCloud storage for files and photos. The company is also developing a new subscription for virtual fitness classes that can be used via an app for iPhone, iPad and Apple TV. This service will be offered in a higher-end bundle with the rest of Apple’s services.
The excitement over the stock split news has bolstered optimism, as it will make the stock more accessible to a broader base of investors. Apple announced a 4-for-1 stock split when it reported its third-quarter fiscal 2020 results. Apple shareholders at the close of trading on Aug 24 will receive three additional shares for each one they currently own. Post-split trading will begin on Aug 31. This is Apple's first stock split since 2014 (read: Apple ETFs to Buy on Blowout Q3 & Stock Split News).
Solid Fundamentals
Apple has seen rising earnings estimate revisions from $15.18 to $16.00 per share for the fiscal year (ending Sep 2021) over the past 90 days. This represents substantial year-over-year growth of 23.8%. Revenues are expected to grow 14.95%. The stock is cheap, trading at a P/E ratio of 35.81 compared with a few FAANG names — Amazon’s (AMZN - Free Report) 101.90 times and Netflix’s (NFLX - Free Report) 77.10 times.
Further, Apple currently carries a Zacks Rank #1 (Strong Buy) and boasts a top-ranked Zacks industry (top 8%), suggesting strong upside for the stock over the coming days (see: all the Technology ETFs here).
ETFs to Buy
Given this, investors seeking to tap the bullishness in the tech titan could consider the following ETFs. These funds have Apple as their top firm with a double-digit allocation and sport a Zacks Rank #1 (Strong Buy) with a Medium risk outlook.
Select Sector SPDR Technology ETF (XLK - Free Report)
This most-popular technology ETF has $35.1 billion in AUM and charges 13 bps in fees per year from investors. AAPL makes up for roughly 24.4% of assets.
MSCI Information Technology Index ETF (FTEC - Free Report)
With AUM of $4.4 billion, the product allocates 22.4% in Apple. The ETF has 0.08% in expense ratio.
iShares Dow Jones US Technology ETF (IYW - Free Report)
This ETF provides investors exposure to technology stocks with 21.4% allocation in Apple. The fund has AUM of $6.2 billion and charges 42 bps in fees and expenses (read: S&P 500 Hits New Record Highs: Top-Ranked ETF Winners).
Vanguard Information Technology ETF (VGT - Free Report)
This fund manages about $35.9 billion in its asset base with 21.4% allocation in Apple. It has 0.10% in expense ratio.
Invesco QQQ (QQQ - Free Report)
This ETF provides exposure to the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. Apple accounts for 13.7% share. It has AUM of $131.3 billion and charges 20 bps in annual fees.
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 >>