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Apple Appears Poised for an Earnings Suprise: ETFs in Focus
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All eyes are on technology giant Apple (AAPL - Free Report) , which is set to release first-quarter fiscal 2024 results after market close today. 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 gained just about 3% over the past three months, underperforming the industry’s growth of 5%. The solid trend is expected to continue, given that the tech giant has reasonable chances to beat earnings estimates and saw a positive earnings estimate revision activity, which is generally a precursor to an earnings beat (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) , iShares US Technology ETF (IYW - Free Report) and Vanguard Mega Cap Growth ETF (MGK - Free Report) have Apple as the top or second firm with a double-digit allocation and sport a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).
Inside Our Methodology
Apple has an Earnings ESP of +1.96% 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 positive earnings estimate revision of a penny over the past 30 days for the fiscal first quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The Zacks Consensus Estimate indicates modest year-over-year growth of 11.2% for earnings and 0.4% for revenues. The company has a strong track record of positive earnings surprises. It delivered an average earnings surprise of 3.47% in the trailing four quarters.
The stock belongs to a top-ranked Zacks Industry (top 24%). Apple currently has an average brokerage recommendation (ABR) of 1.83 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 27 brokerage firms. The current ABR compares to an ABR of 1.80 a month ago based on 28 recommendations.
Of the 27 recommendations deriving the current ABR, 15 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 55.56% and 11.11% of all recommendations. A month ago, Strong Buy made up 57.14%, while Buy represented 10.71%.
Based on short-term price targets offered by 24 analysts, the average price target for Apple comes to $206.08. The forecasts range from a low of $160.00 to a high of $250.00.
What to Watch
On the last earnings call, the tech giant offered a cautious outlook for the holiday quarter. Apple CFO Luca Maestri indicated that revenues in the holiday quarter are expected to be "similar" to last year, with revenues for Mac, iPad, and Wearables categories expected to "decelerate significantly" from the fourth quarter.
Apple stock has been struggling since the start of this year on concerns about iPhone sales, particularly in China. Two analysts — Piper Sandler and Barclays — downgraded the stock rating on worries about iPhone demand early this month. Added to Apple's challenges is the tepid forecast for its new product, the Vision Pro mixed-reality headset, which is set to be launched in the United States on Feb 2. Analysts predict that its impact on Apple's earnings per share will be minimal.
Technology Select Sector SPDR Fund targets the broad technology sector and follows the Technology Select Sector Index. It holds about 64 securities in its basket, with Apple making up for 20.4% share. Technology Select Sector SPDR Fund has key holdings in software, semiconductors and semiconductor equipment, and technology hardware, storage and peripherals.
Technology Select Sector SPDR Fund is the most popular and heavily traded ETF, with an AUM of $62.4 billion and an average daily volume of 7 million shares. The fund charges 9 bps in fees per year.
Vanguard Information Technology ETF manages $62.2 billion in its asset base and provides exposure to 312 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, Apple accounts for a 21.5% share. Systems software, technology hardware storage & peripheral, semiconductors, and application software are the top four sectors.
MSCI Information Technology Index ETF is home to 303 technology stocks with an AUM of $8.8 billion. It follows the MSCI USA IMI Information Technology Index. Apple accounts for a 21.6% share in the basket.
MSCI Information Technology Index ETF has an expense ratio of 0.08%, while volume is solid at 245,000 shares a day.
iShares Dow Jones US Technology ETF tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, giving investors exposure to 133 U.S. electronics, computer software and hardware, and informational technology companies. Apple makes up 15.8% of the assets.
iShares Dow Jones US Technology ETF has an AUM of $15 billion and charges 40 bps in fees and expenses. Volume is good as it exchanges 668,000 shares a day.
Vanguard Mega Cap Growth ETF offers diversified exposure to the largest growth stocks in the U.S. market. It tracks the CRSP US Mega Cap Growth Index and holds 82 securities in its basket, with Apple accounting for 14.8% of the total assets (read: 5 Best Top-Ranked ETFs of 2023 Set to Soar in 2024).
Vanguard Mega Cap Growth ETF charges 7 bps in annual fees and trades in a good volume of around 337,000 shares a day on average. The fund has an AUM of $17.6 billion.
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Apple Appears Poised for an Earnings Suprise: ETFs in Focus
All eyes are on technology giant Apple (AAPL - Free Report) , which is set to release first-quarter fiscal 2024 results after market close today. 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 gained just about 3% over the past three months, underperforming the industry’s growth of 5%. The solid trend is expected to continue, given that the tech giant has reasonable chances to beat earnings estimates and saw a positive earnings estimate revision activity, which is generally a precursor to an earnings beat (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) , iShares US Technology ETF (IYW - Free Report) and Vanguard Mega Cap Growth ETF (MGK - Free Report) have Apple as the top or second firm with a double-digit allocation and sport a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).
Inside Our Methodology
Apple has an Earnings ESP of +1.96% 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 positive earnings estimate revision of a penny over the past 30 days for the fiscal first quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The Zacks Consensus Estimate indicates modest year-over-year growth of 11.2% for earnings and 0.4% for revenues. The company has a strong track record of positive earnings surprises. It delivered an average earnings surprise of 3.47% in the trailing four quarters.
The stock belongs to a top-ranked Zacks Industry (top 24%). Apple currently has an average brokerage recommendation (ABR) of 1.83 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 27 brokerage firms. The current ABR compares to an ABR of 1.80 a month ago based on 28 recommendations.
Of the 27 recommendations deriving the current ABR, 15 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 55.56% and 11.11% of all recommendations. A month ago, Strong Buy made up 57.14%, while Buy represented 10.71%.
Based on short-term price targets offered by 24 analysts, the average price target for Apple comes to $206.08. The forecasts range from a low of $160.00 to a high of $250.00.
What to Watch
On the last earnings call, the tech giant offered a cautious outlook for the holiday quarter. Apple CFO Luca Maestri indicated that revenues in the holiday quarter are expected to be "similar" to last year, with revenues for Mac, iPad, and Wearables categories expected to "decelerate significantly" from the fourth quarter.
Apple stock has been struggling since the start of this year on concerns about iPhone sales, particularly in China. Two analysts — Piper Sandler and Barclays — downgraded the stock rating on worries about iPhone demand early this month. Added to Apple's challenges is the tepid forecast for its new product, the Vision Pro mixed-reality headset, which is set to be launched in the United States on Feb 2. Analysts predict that its impact on Apple's earnings per share will be minimal.
ETFs in Focus
Technology Select Sector SPDR Fund (XLK - Free Report)
Technology Select Sector SPDR Fund targets the broad technology sector and follows the Technology Select Sector Index. It holds about 64 securities in its basket, with Apple making up for 20.4% share. Technology Select Sector SPDR Fund has key holdings in software, semiconductors and semiconductor equipment, and technology hardware, storage and peripherals.
Technology Select Sector SPDR Fund is the most popular and heavily traded ETF, with an AUM of $62.4 billion and an average daily volume of 7 million shares. The fund charges 9 bps in fees per year.
Vanguard Information Technology ETF (VGT - Free Report)
Vanguard Information Technology ETF manages $62.2 billion in its asset base and provides exposure to 312 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, Apple accounts for a 21.5% share. Systems software, technology hardware storage & peripheral, semiconductors, and application software are the top four sectors.
Vanguard Information Technology ETF has an expense ratio of 0.10%, whereas volume is solid at nearly 494,000 shares (read: Tech Leads S&P 500 to Highs: Does Further Rally Await ETFs?).
MSCI Information Technology Index ETF (FTEC - Free Report)
MSCI Information Technology Index ETF is home to 303 technology stocks with an AUM of $8.8 billion. It follows the MSCI USA IMI Information Technology Index. Apple accounts for a 21.6% share in the basket.
MSCI Information Technology Index ETF has an expense ratio of 0.08%, while volume is solid at 245,000 shares a day.
iShares US Technology ETF (IYW - Free Report)
iShares Dow Jones US Technology ETF tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, giving investors exposure to 133 U.S. electronics, computer software and hardware, and informational technology companies. Apple makes up 15.8% of the assets.
iShares Dow Jones US Technology ETF has an AUM of $15 billion and charges 40 bps in fees and expenses. Volume is good as it exchanges 668,000 shares a day.
Vanguard Mega Cap Growth ETF (MGK - Free Report)
Vanguard Mega Cap Growth ETF offers diversified exposure to the largest growth stocks in the U.S. market. It tracks the CRSP US Mega Cap Growth Index and holds 82 securities in its basket, with Apple accounting for 14.8% of the total assets (read: 5 Best Top-Ranked ETFs of 2023 Set to Soar in 2024).
Vanguard Mega Cap Growth ETF charges 7 bps in annual fees and trades in a good volume of around 337,000 shares a day on average. The fund has an AUM of $17.6 billion.