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What's in Store for Big Tech ETFs in Q4 Earnings?

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

The technology sector, which was hit the hardest by soaring yields and a hawkish Fed, showed a strong comeback to start 2023. Hopes that the Fed will soon wrap up its inflation-fighting campaign and optimism over cooling inflation have compelled investors to buy beaten-up technology stocks (read: 5 Tech ETFs Riding High on Sectors' Comeback to Start 2023).

Microsoft is expected to release results on Jan 24 after market close, while Meta Platforms will report on Feb 1. Alphabet, Apple and Amazon are scheduled to release their earnings on Feb 2.

Microsoft

Microsoft has a Zacks Rank #3 (Hold) and an Earnings ESP of 0.34%. 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 stock witnessed a positive earnings estimate revision of a penny for the to-be-reported quarter over the past 30 days. Analysts increasing estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. Microsoft’s earnings track is impressive, with the last four-quarter earnings surprise being 2.64%, on average. The Zacks Consensus Estimate indicates a substantial earnings decline of 7.8% and a modest revenue growth of 2.3% from the year-ago quarter. Microsoft belongs to a top-ranked Zacks industry (top 33%) and has lost about 1.8% over the past three months (see: all the Technology ETFs here).

Meta Platforms

Meta Platforms has a Zacks Rank #3 and an Earnings ESP of +6.88%. The social media giant saw a negative earnings estimate revision of a penny 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 42.2%. Revenues are also expected to decrease 7%. Meta Platforms delivered a negative earnings surprise of 2.55%, on average, in the last four quarters. The stock belongs to a top-ranked Zacks industry (top 26%). Shares of META have gained more than 10% in the past three months.

Alphabet

Alphabet has a Zacks Rank #3 and an Earnings ESP of -4.85%. 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 not good, with the beat being negative 2.28%, on average. Earnings are expected to decline 23.5%, while revenues are expected to grow 2.1% from the year-ago quarter. However, Alphabet falls under a top-ranked Zacks industry (top 35%). The Internet behemoth has shed about 3% in the past three months.

Apple

Apple has a Zacks Rank #3 and an Earnings ESP of +4.42%. The stock saw no earnings estimate revision over the past 30 days for first-quarter fiscal 2023, and its earnings surprise history is strong. It delivered an earnings surprise of 6.26%, on average, over the past four quarters. Apple is expected to report an earnings decline of 8.1% and a revenue decline of 2.46% from the year-ago quarter. It belongs to a bottom-ranked Zacks industry (bottom 5%). The stock has declined 5.5% in the past three-month timeframe.

Amazon

Amazon has a Zacks Rank #3 and an Earnings ESP of -16.30%. The stock saw no earnings estimate revision over the past 30 days for the fourth quarter. The Zacks Consensus Estimate represents a substantial year-over-year earnings decline of 87.8% and revenue growth of 5.92%. Amazon’s earnings surprise history is impressive, with an average beat of 129.88% for the last four quarters. The stock falls under a top-ranked Zacks industry (top 13%). The online e-commerce behemoth has witnessed a share price fall of 18.6% 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): 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: ETFs to Click on Netflix's Blowout Q4 Subscriber Growth).

Blue Chip Growth ETF (TCHP): This fund focuses on companies with leading market positions, seasoned management and strong financial fundamentals. It accounts for a combined 40% share in the five firms.

Vanguard Mega Cap Growth ETF (MGK): 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 39.7% share in the basket.

Invesco QQQ (QQQ): 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 a 36.7% share in the in-focus firms and has a Zacks ETF Rank #3 with a Medium risk outlook (read: 5 Stocks Powering Nasdaq ETF to Start 2023).

iShares U.S. Tech Independence Focused ETF (IETC): This fund offers exposure to U.S. companies with a focus on U.S. tech independence. The five firms account for a combined 23.6% share in the basket.

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