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Can Q4 Earnings Give a New Lease of Life to Apple ETFs?
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All eyes are on the technology giant Apple (AAPL - Free Report) , which is set to release fourth-quarter fiscal 2023 results on Nov 2 after market close. Since Apple accounts for nearly 7% of the total market capitalization of the entire technology sector on the S&P 500 Index, it is worth taking a look at its fundamentals ahead of its quarterly results.
Apple has shed about 13% over the past three months, underperforming the industry’s decline of 12.1%. The trend might reverse if the company’s earnings beat estimates in the soon-to-be-reported quarter (see: all the Technology ETFs here).
This has put investors’ focus on ETFs having the largest allocation to the tech titan. Technology Select Sector SPDR Fund (XLK - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) , MSCI Information Technology Index ETF (FTEC - Free Report) and iShares US Technology ETF (IYW - Free Report) have Apple as the top or second firm with a double-digit allocation and carry a Zacks Rank #1 (Strong Buy).
Inside Our Methodology
Apple has an Earnings ESP of -1.13% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 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.
Apple saw no earnings estimate revision over the past 30 days for the fiscal fourth quarter. The company has a strong track record of positive earnings surprises. It delivered an average earnings surprise of 2.81% in the trailing four quarters. The tech titan is expected to report the fourth consecutive decline in revenues that could spread fears of pessimism. The Zacks Consensus Estimate indicates modest year-over-year growth of 7.75% for earnings and a decline of 1.5% for revenues.
The stock belongs to a top-ranked Zacks Industry (top 21%) and has a solid Growth Score of B. Apple currently has an average brokerage recommendation (ABR) of 1.71 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 29 brokerage firms. The current ABR compares to an ABR of 1.64 a month ago based on 29 recommendations.
Of the 29 recommendations deriving the current ABR, 17 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 58.62% and 10.34% of all recommendations. A month ago, Strong Buy made up 62.07%, while Buy represented 10.34% (read: 5 Inverse Tech ETFs That Rose on Nasdaq Entry Into Correction).
Based on short-term price targets offered by 26 analysts, the average price target for Apple comes to $205.46. The forecasts range from a low of $140.00 to a high of $240.00.
What to Watch
On the last earnings call, the tech giant expected fiscal fourth-quarter year-over-year revenues to be “down,” similar to the third quarter. An additional drop in revenues would mark the longest streak of declines in two decades — a surprising slowdown for the world’s most valuable company.
What’s New?
The iPhone maker unveiled its most powerful chips ever in the M3 range during its “Scary Fast” event on Oct 30. It also announced an updated line of its Macs and MacBooks, powered by the next-generation family of custom-made processors — the M3, M3 Pro and M3 Pro Max — just ahead of the fourth-quarter earnings. Prices for the new models will range from $649 for the new Mac mini to $1,599 for the 14" and 16" MacBook Pro, likely to be available a month from now.
Technology Select Sector SPDR Fund (XLK - Free Report) : The fund has AUM of $46.6 billion and has declined 8.3% over the past three months. Apple makes up 23.3% of the assets.
Vanguard Information Technology ETF (VGT - Free Report) : It has AUM of $48.1 billion and has lost 1.3% over the past three months. Here, AAPL has a 21.2% share.
MSCI Information Technology Index ETF (FTEC - Free Report) : With AUM of $6.7 billion, the ETF allocates a 22.3% share in Apple stock. It has plunged 9.7% over the past three months.
iShares US Technology ETF (IYW - Free Report) : The fund has amassed $11.2 billion in its asset base and shed 8.9% in the past three months. Apple accounts for 18.2% of the assets.
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Can Q4 Earnings Give a New Lease of Life to Apple ETFs?
All eyes are on the technology giant Apple (AAPL - Free Report) , which is set to release fourth-quarter fiscal 2023 results on Nov 2 after market close. Since Apple accounts for nearly 7% of the total market capitalization of the entire technology sector on the S&P 500 Index, it is worth taking a look at its fundamentals ahead of its quarterly results.
Apple has shed about 13% over the past three months, underperforming the industry’s decline of 12.1%. The trend might reverse if the company’s earnings beat estimates in the soon-to-be-reported quarter (see: all the Technology ETFs here).
This has put investors’ focus on ETFs having the largest allocation to the tech titan. Technology Select Sector SPDR Fund (XLK - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) , MSCI Information Technology Index ETF (FTEC - Free Report) and iShares US Technology ETF (IYW - Free Report) have Apple as the top or second firm with a double-digit allocation and carry a Zacks Rank #1 (Strong Buy).
Inside Our Methodology
Apple has an Earnings ESP of -1.13% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 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.
Apple saw no earnings estimate revision over the past 30 days for the fiscal fourth quarter. The company has a strong track record of positive earnings surprises. It delivered an average earnings surprise of 2.81% in the trailing four quarters. The tech titan is expected to report the fourth consecutive decline in revenues that could spread fears of pessimism. The Zacks Consensus Estimate indicates modest year-over-year growth of 7.75% for earnings and a decline of 1.5% for revenues.
The stock belongs to a top-ranked Zacks Industry (top 21%) and has a solid Growth Score of B. Apple currently has an average brokerage recommendation (ABR) of 1.71 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 29 brokerage firms. The current ABR compares to an ABR of 1.64 a month ago based on 29 recommendations.
Of the 29 recommendations deriving the current ABR, 17 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 58.62% and 10.34% of all recommendations. A month ago, Strong Buy made up 62.07%, while Buy represented 10.34% (read: 5 Inverse Tech ETFs That Rose on Nasdaq Entry Into Correction).
Based on short-term price targets offered by 26 analysts, the average price target for Apple comes to $205.46. The forecasts range from a low of $140.00 to a high of $240.00.
What to Watch
On the last earnings call, the tech giant expected fiscal fourth-quarter year-over-year revenues to be “down,” similar to the third quarter. An additional drop in revenues would mark the longest streak of declines in two decades — a surprising slowdown for the world’s most valuable company.
What’s New?
The iPhone maker unveiled its most powerful chips ever in the M3 range during its “Scary Fast” event on Oct 30. It also announced an updated line of its Macs and MacBooks, powered by the next-generation family of custom-made processors — the M3, M3 Pro and M3 Pro Max — just ahead of the fourth-quarter earnings. Prices for the new models will range from $649 for the new Mac mini to $1,599 for the 14" and 16" MacBook Pro, likely to be available a month from now.
The release of the new Mac line comes a month after its new iPhone 15 went on sale (read: Apple ETFs in Focus Post iPhone 15 Launch).
ETFs in Focus
Technology Select Sector SPDR Fund (XLK - Free Report) : The fund has AUM of $46.6 billion and has declined 8.3% over the past three months. Apple makes up 23.3% of the assets.
Vanguard Information Technology ETF (VGT - Free Report) : It has AUM of $48.1 billion and has lost 1.3% over the past three months. Here, AAPL has a 21.2% share.
MSCI Information Technology Index ETF (FTEC - Free Report) : With AUM of $6.7 billion, the ETF allocates a 22.3% share in Apple stock. It has plunged 9.7% over the past three months.
iShares US Technology ETF (IYW - Free Report) : The fund has amassed $11.2 billion in its asset base and shed 8.9% in the past three months. Apple accounts for 18.2% of the assets.