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We are in the peak of the third-quarter earnings season and tech giants are in the spotlight next 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) — are set to report.
These five companies currently account for about 23% of the total market capitalization of the S&P 500 Index. Most of these are expected to report slowing profit and revenue growth, or even year-over-year declines, for the three months ending in September, according to the analyst estimates.
The technology sector, which was hit the hardest by soaring yields and a hawkish Fed, has shown some strength lately. However, their earnings are expected to take a hit from the strength in the U.S. dollar, which is currently trading at its highest level in two decades (read: Dollar at 20-Year High: ETFs to Gain & Lose).
Both Microsoft and Alphabet are scheduled to release their earnings on Oct 25, while Meta Platforms and Apple will report on Oct 26 and Oct 27, respectively. Amazon is also slated to report on Oct 27.
Microsoft
Microsoft has a Zacks Rank #4 (Sell) and an Earnings ESP of -0.65%. 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 1.3% and revenue growth of 9.4% from the year-ago quarter. Microsoft’s earnings track is impressive, with the last four-quarter earnings surprise being 4.53%, on average. However, the stock witnessed negative earnings estimate revision of a penny for the to-be-reported quarter over the past 30 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 top-ranked Zacks industry (top 33%) and has lost about 12% over the past three months (see: all the Technology ETFs here).
Alphabet
Alphabet has a Zacks Rank #3 and an Earnings ESP of -2.07%. It saw no earnings estimate revision 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 6.77%, on average. Earnings are expected to decline 10.7%, while revenues are expected to grow 8.8% from the year-ago quarter. Alphabet falls under a top-ranked Zacks industry (top 20%). The Internet behemoth has shed about 12% in the past three months (read: Apple ETFs in Focus Post iPhone 14 Launch).
Meta Platforms
Meta Platforms has a Zacks Rank #4 and an Earnings ESP of -3.21%. The social media giant saw a negative earnings estimate revision of couple of cents for the to-be-reported quarter over the past seven days. The current Zacks Consensus Estimate for the yet-to-be reported quarter indicates a substantial year-over-year earnings decline of 43.5%. Revenues are expected to decrease 5.4%. Meta Platforms delivered an earnings surprise of 0.80%, on average, in the last four quarters. The stock belongs to a top-ranked Zacks industry (top 27%). Shares of META have lost about 21% in the past three months.
Apple
Apple has a Zacks Rank #3 and an Earnings ESP of +0.79%. The stock saw positive earnings estimate revision over the past 30 days for fourth-quarter fiscal 2022, and its earnings surprise history is strong. It delivered an earnings surprise of 5.67%, on average, over the past four quarters. Apple is expected to report a modest earnings growth of 1.6% from the year-ago quarter and revenues are expected to increase 6.1% year over year. It belongs to a bottom-ranked Zacks industry (bottom 6%). The stock has declined 8% in the past three-month timeframe.
Amazon
Amazon has a Zacks Rank #4 and an Earnings ESP of -27.66%. The stock saw a positive earnings estimate revision of a penny over the past 30 days for the third quarter. The Zacks Consensus Estimate represents a substantial year-over-year earnings decline of 22.6% and revenue growth of 15.6%. Amazon’s earnings surprise history is impressive, with an average beat of 124.7% for the last four quarters. The stock falls under a top-ranked Zacks industry (top 20%). The online e-commerce behemoth has witnessed a share price fall of 5% 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: Netflix Returns to Growth, Shares Spike: ETFs to Tap).
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 46.6% 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 #3. The five firms account for a combined 42.9% 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 42.9% 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 37.3% share in the in-focus firms and has a Zacks ETF Rank #3 with a Medium risk outlook.
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What Lies Ahead for Big Tech ETFs in Q3 Earnings?
We are in the peak of the third-quarter earnings season and tech giants are in the spotlight next 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) — are set to report.
These five companies currently account for about 23% of the total market capitalization of the S&P 500 Index. Most of these are expected to report slowing profit and revenue growth, or even year-over-year declines, for the three months ending in September, according to the analyst estimates.
The technology sector, which was hit the hardest by soaring yields and a hawkish Fed, has shown some strength lately. However, their earnings are expected to take a hit from the strength in the U.S. dollar, which is currently trading at its highest level in two decades (read: Dollar at 20-Year High: ETFs to Gain & Lose).
Both Microsoft and Alphabet are scheduled to release their earnings on Oct 25, while Meta Platforms and Apple will report on Oct 26 and Oct 27, respectively. Amazon is also slated to report on Oct 27.
Microsoft
Microsoft has a Zacks Rank #4 (Sell) and an Earnings ESP of -0.65%. 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 1.3% and revenue growth of 9.4% from the year-ago quarter. Microsoft’s earnings track is impressive, with the last four-quarter earnings surprise being 4.53%, on average. However, the stock witnessed negative earnings estimate revision of a penny for the to-be-reported quarter over the past 30 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 top-ranked Zacks industry (top 33%) and has lost about 12% over the past three months (see: all the Technology ETFs here).
Alphabet
Alphabet has a Zacks Rank #3 and an Earnings ESP of -2.07%. It saw no earnings estimate revision 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 6.77%, on average. Earnings are expected to decline 10.7%, while revenues are expected to grow 8.8% from the year-ago quarter. Alphabet falls under a top-ranked Zacks industry (top 20%). The Internet behemoth has shed about 12% in the past three months (read: Apple ETFs in Focus Post iPhone 14 Launch).
Meta Platforms
Meta Platforms has a Zacks Rank #4 and an Earnings ESP of -3.21%. The social media giant saw a negative earnings estimate revision of couple of cents for the to-be-reported quarter over the past seven days. The current Zacks Consensus Estimate for the yet-to-be reported quarter indicates a substantial year-over-year earnings decline of 43.5%. Revenues are expected to decrease 5.4%. Meta Platforms delivered an earnings surprise of 0.80%, on average, in the last four quarters. The stock belongs to a top-ranked Zacks industry (top 27%). Shares of META have lost about 21% in the past three months.
Apple
Apple has a Zacks Rank #3 and an Earnings ESP of +0.79%. The stock saw positive earnings estimate revision over the past 30 days for fourth-quarter fiscal 2022, and its earnings surprise history is strong. It delivered an earnings surprise of 5.67%, on average, over the past four quarters. Apple is expected to report a modest earnings growth of 1.6% from the year-ago quarter and revenues are expected to increase 6.1% year over year. It belongs to a bottom-ranked Zacks industry (bottom 6%). The stock has declined 8% in the past three-month timeframe.
Amazon
Amazon has a Zacks Rank #4 and an Earnings ESP of -27.66%. The stock saw a positive earnings estimate revision of a penny over the past 30 days for the third quarter. The Zacks Consensus Estimate represents a substantial year-over-year earnings decline of 22.6% and revenue growth of 15.6%. Amazon’s earnings surprise history is impressive, with an average beat of 124.7% for the last four quarters. The stock falls under a top-ranked Zacks industry (top 20%). The online e-commerce behemoth has witnessed a share price fall of 5% 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: Netflix Returns to Growth, Shares Spike: ETFs to Tap).
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 46.6% 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 #3. The five firms account for a combined 42.9% 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 42.9% 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 37.3% share in the in-focus firms and has a Zacks ETF Rank #3 with a Medium risk outlook.