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The world's largest software maker — Microsoft (MSFT - Free Report) — downgraded its near-term outlook, citing the impact of the strongest U.S. dollar in more than two decades. This has dampened investors’ mood making them cautious about the stock and the ETFs having double-digit exposure to Microsoft.
These are Select Sector SPDR Technology ETF (XLK - Free Report) , iShares Dow Jones US Technology ETF (IYW - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) , MSCI Information Technology Index ETF (FTEC - Free Report) and iShares Global Tech ETF (IXN - Free Report) .
Microsoft now expects fiscal fourth-quarter sales between $51.94-$52.74 billion, down from its prior guidance of $52.4-$53.2 billion. Earnings are expected in the range of $2.24-$2.32 per share, down from prior guidance of $2.28-$2.35 per share.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, hit a 20-year high of 104.85 last month and is up more than 13.3% from the same period last year. A strong dollar hurt blue-chip companies, which derive the majority of revenues from international markets, as this makes dollar-denominated assets expensive for foreign investors. As such, companies with a greater percentage of international sales will likely underperform (read: Is There 'Massive' Opportunity in Tech? ETFs to Play).
In its last earnings, the software giant continued a long track of beating earnings estimates and topped the revenue estimate driven by strong growth in its Azure platform in the booming cloud computing space. Microsoft forecasts double-digit revenue growth for the next fiscal year, driven by demand for cloud computing services.
Microsoft is the latest multinational company to warn of the stronger dollar’s impact on financials. Salesforce Inc. (CRM - Free Report) earlier this week also slashed its sales outlook for the year, citing a strong dollar.
Select Sector SPDR Technology ETF is the most popular and liquid ETFs in the technology space, with AUM of $42.2 billion and an average daily volume of 12 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 76 securities in its basket, with Microsoft occupying the top position at 22.1%.
Select Sector SPDR Technology ETF charges 10 bps in fees per year from investors and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares U.S. Technology ETF provides exposure to U.S. electronics, computer software and hardware, and informational technology companies. It tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, holding 151 securities in its basket. Of these, Microsoft occupies the second position in the basket with 16.2% of the assets.
iShares Dow Jones US Technology ETF has AUM of $7.1 billion and charges 41 bps in fees and expenses. Volume is good as it exchanges nearly 666,000 shares a day. IYW has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Grab These Top-Ranked Tech ETFs to Buy the Dip).
Vanguard Information Technology ETF manages about $44.2 billion in its asset base and provides exposure to 357 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with an 18.1% share.
Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 794,000 shares. It has a Zacks ETF Rank #1 with a Medium risk outlook (read: Consider These ETF Areas to Buy the Dips).
MSCI Information Technology Index ETF is home to 364 technology stocks with AUM of $5.6 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with an 18.1% allocation.
MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 381,000 shares a day. It carries a Zacks ETF Rank #1 with a Medium risk outlook.
iShares Global Tech ETF provides exposure to electronics, computer software and hardware, and informational technology companies by tracking the S&P Global 1200 Information Technology Sector Index. Holding 132 stocks in its basket, Microsoft occupies the second spot with a 17.6% share.
iShares Global Tech ETF has amassed $3.7 billion in its asset base and trades in a good volume of 806,000 shares a day, on average. The expense ratio is 0.43%.
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Microsoft Lowers Guidance: ETFs in Focus
The world's largest software maker — Microsoft (MSFT - Free Report) — downgraded its near-term outlook, citing the impact of the strongest U.S. dollar in more than two decades. This has dampened investors’ mood making them cautious about the stock and the ETFs having double-digit exposure to Microsoft.
These are Select Sector SPDR Technology ETF (XLK - Free Report) , iShares Dow Jones US Technology ETF (IYW - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) , MSCI Information Technology Index ETF (FTEC - Free Report) and iShares Global Tech ETF (IXN - Free Report) .
Microsoft now expects fiscal fourth-quarter sales between $51.94-$52.74 billion, down from its prior guidance of $52.4-$53.2 billion. Earnings are expected in the range of $2.24-$2.32 per share, down from prior guidance of $2.28-$2.35 per share.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, hit a 20-year high of 104.85 last month and is up more than 13.3% from the same period last year. A strong dollar hurt blue-chip companies, which derive the majority of revenues from international markets, as this makes dollar-denominated assets expensive for foreign investors. As such, companies with a greater percentage of international sales will likely underperform (read: Is There 'Massive' Opportunity in Tech? ETFs to Play).
In its last earnings, the software giant continued a long track of beating earnings estimates and topped the revenue estimate driven by strong growth in its Azure platform in the booming cloud computing space. Microsoft forecasts double-digit revenue growth for the next fiscal year, driven by demand for cloud computing services.
Microsoft is the latest multinational company to warn of the stronger dollar’s impact on financials. Salesforce Inc. (CRM - Free Report) earlier this week also slashed its sales outlook for the year, citing a strong dollar.
ETFs in Focus
Select Sector SPDR Technology ETF (XLK - Free Report)
Select Sector SPDR Technology ETF is the most popular and liquid ETFs in the technology space, with AUM of $42.2 billion and an average daily volume of 12 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 76 securities in its basket, with Microsoft occupying the top position at 22.1%.
Select Sector SPDR Technology ETF charges 10 bps in fees per year from investors and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.
iShares U.S. Technology ETF (IYW - Free Report)
iShares U.S. Technology ETF provides exposure to U.S. electronics, computer software and hardware, and informational technology companies. It tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, holding 151 securities in its basket. Of these, Microsoft occupies the second position in the basket with 16.2% of the assets.
iShares Dow Jones US Technology ETF has AUM of $7.1 billion and charges 41 bps in fees and expenses. Volume is good as it exchanges nearly 666,000 shares a day. IYW has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Grab These Top-Ranked Tech ETFs to Buy the Dip).
Vanguard Information Technology ETF (VGT - Free Report)
Vanguard Information Technology ETF manages about $44.2 billion in its asset base and provides exposure to 357 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with an 18.1% share.
Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 794,000 shares. It has a Zacks ETF Rank #1 with a Medium risk outlook (read: Consider These ETF Areas to Buy the Dips).
MSCI Information Technology Index ETF (FTEC - Free Report)
MSCI Information Technology Index ETF is home to 364 technology stocks with AUM of $5.6 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with an 18.1% allocation.
MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 381,000 shares a day. It carries a Zacks ETF Rank #1 with a Medium risk outlook.
iShares Global Tech ETF (IXN - Free Report)
iShares Global Tech ETF provides exposure to electronics, computer software and hardware, and informational technology companies by tracking the S&P Global 1200 Information Technology Sector Index. Holding 132 stocks in its basket, Microsoft occupies the second spot with a 17.6% share.
iShares Global Tech ETF has amassed $3.7 billion in its asset base and trades in a good volume of 806,000 shares a day, on average. The expense ratio is 0.43%.