Back to top

Image: Bigstock

ETFs to Tap Microsoft's Longest Win Streak Since 2021

Read MoreHide Full Article

Microsoft (MSFT - Free Report) is in the midst of its longest winning streak since Jan 28, 2021, rising for eight consecutive days. The fresh optimism about growth by a key partner in artificial intelligence drove the shares to a new peak, sending the software maker’s market value to about $2.68 trillion – second only to Apple (AAPL). The stock is up 50% this year.

Investors could tap the strength of this software leader through ETFs having double-digit exposure to Microsoft. These are Select Sector SPDR Technology ETF (XLK - Free Report) , MSCI Information Technology Index ETF (FTEC - Free Report) , iShares Global Tech ETF (IXN - Free Report) , Vanguard Information Technology ETF (VGT - Free Report) and iShares Dow Jones US Technology ETF (IYW - Free Report) .

At an event in San Francisco on Nov 6, Microsoft’s strategic AI partner, OpenAI, announced a slew of updates, including price cuts and plans to allow people to make custom versions of the ChatGPT chatbot. Microsoft, which has reportedly invested $13 billion in OpenAI, emphasized luring more developers to use its Azure cloud infrastructure for computing and storage rather than choosing competitive offerings from Amazon Web Services and Google Cloud. Azure has become Microsoft’s key growth engine in recent years and has helped revive the company’s brand among developers, according to CNBC.

Further, the robust first-quarter fiscal 2024 results bolstered investors' optimism in the company’s growth prospects. The world's largest software maker reported the strongest sales increase in six quarters, buoyed by higher demand for its cloud computing services amid growing enthusiasm about artificial intelligence. Microsoft is optimistic about the long-term prospects of its Azure business, as it expects revenues in this segment to continue its acceleration in the rest of the fiscal year (read: ETFs to Buy on Solid AI-Fueled Microsoft Q1 Earnings).

Bulls Are Here!

Wall Street is bullish on the stock. Microsoft currently has an average brokerage recommendation (ABR) of 1.30 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 37 brokerage firms. The current ABR compares to an ABR of 1.31 a month ago based on 36 recommendations.

Of the 37 recommendations deriving the current ABR, 30 are Strong Buy and three are Buy. Strong Buy and Buy, respectively account for 81.08% and 8.11% of all recommendations. A month ago, Strong Buy made up 80.56%, while Buy represented 8.33%.

Based on short-term price targets offered by 35 analysts, the average price target for Microsoft comes to $393.03. The forecasts range from a low of $232.00 to a high of $450.00.

Solid Earnings Estimate Revisions

Microsoft saw a solid earnings estimate revision of 21 cents over the past month for the fiscal year (ending June 2024), with an estimated earnings growth of 13.2%. This compares favorably with the industry’s growth projection of 12.37%.

MSFT has a Zacks Rank #2 (Buy) and a top Growth Score of A. The stock falls under a top-ranked Zacks industry (top 26%).

ETFs to Tap

Select Sector SPDR Technology ETF (XLK - Free Report)

Select Sector SPDR Technology ETF is the most popular and liquid ETF in the technology space, with AUM of $49 billion and an average daily volume of 6.5 million shares. It offers broad exposure to the technology sector and follows the Technology Select Sector Index. Select Sector SPDR Technology ETF holds about 64 securities in its basket, with Microsoft occupying the top position at 24.5%.

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 (read: Fed Stays Put: 5 Winning Tech ETFs).

MSCI Information Technology Index ETF (FTEC - Free Report)

MSCI Information Technology Index ETF is home to 315 technology stocks with AUM of $7.2 billion. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with a 22% allocation.

MSCI Information Technology Index ETF has 0.08% in expense ratio, while volume is solid at 204,000 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 4.5/22.5/45 Capped Index. Holding 115 stocks in its basket, Microsoft occupies the top spot with a 20.9% share.

iShares Global Tech ETF has amassed $3.5 billion in its asset base and trades in a good volume of 117,000 shares a day, on average. The expense ratio is 0.41%.

Vanguard Information Technology ETF (VGT - Free Report)

Vanguard Information Technology ETF manages about $51.3 billion in its asset base and provides exposure to 319 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, MSFT occupies the second position with a 17% share (read: 5 Sector ETFs for Bountiful Returns in November).

Vanguard Information Technology ETF has 0.10% in expense ratio, while volume is solid at nearly 489,000 shares. It has a Zacks ETF Rank #1 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 134 securities in its basket. Of these, Microsoft occupies the second position in the basket, with 18.1% of the assets.

iShares Dow Jones US Technology ETF has AUM of $12 billion and charges 40 bps in fees and expenses. Volume is good as it exchanges nearly 667,000 shares a day. IYW has a Zacks ETF Rank #1 with a Medium risk outlook.

Published in