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Apple Misses iPhone Sales Estimates: Tap Value with These ETFs

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Technology giant Apple Inc. (AAPL - Free Report) encouraged investors with robust first-quarter fiscal 2018 results, after the closing bell yesterday. The company generated record quarterly revenues and earnings per share, surpassing the Zacks Consensus Estimate.

However, it missed the iPhone sales guidance and offered a disappointing outlook for the second quarter. As a result, the stock dropped immediately after the report in aftermarket hours but recovered later, rising more than 3%. Apple's comments about its plan to return more than half of its $285 billion in cash to shareholders helped boost shares, erasing investors’ concerns (read: Profit From Apple's Big Plans With These ETFs).

Apple Q1 Results in Focus

Earnings per share came in at $3.89, beating the Zacks Consensus Estimate by seven cents and improving from the year-ago earnings of $3.36. Revenues grew 13% year over year to a record $88.3 billion and edged past the estimate of $86.29 billion. The record results were driven primarily by a 13% increase in iPhone revenues and an 18% increase in revenues from the service unit, which includes AppleCare, Apple Pay and Apple Music.

Apple sold 77.32 million iPhones in the fiscal first quarter, down from 78.3 million units in the year-ago quarter and well below the Wall Street estimate of 80 million units. This suggests concerns over the demand for the iPhones. Revenues of iPad and other products, such as Apple TV, Watch and AirPods, increased 6% and 36%, respectively, while Mac revenues dropped 5%.

The ubiquitous gadget-maker foresees revenues in the range of $60-$62 billion for the second quarter of fiscal 2018. This is much below the current Zacks Consensus Estimate of $65.44 billion (see: all the Technology ETFs here).

Apple currently has a Zacks Rank #3 (Hold) and flaunts a solid Value Style Score of B, suggesting significant upside for the stock over the coming days. However, it belongs to a bottom-ranked Zacks industry (bottom 11%).

ETFs in Focus

Given this, investors seeking to tap the value of the tech titan could consider the following ETFs. These funds have Apple as their top firm with a double-digit allocation and a solid Zacks ETF Rank of 1 (Strong Buy) or 2 (Buy):

iShares Dow Jones US Technology ETF IYW

This ETF provides investors exposure to technology stocks with 15.8% allocation in Apple. The fund has AUM of $4.2 billion and charges 44 bps in fees and expenses. It has a Zacks ETF Rank #1 (Strong Buy) and has gained 7.2% so far this year.

Select Sector SPDR Technology ETF XLK

This most popular technology ETF has $21.8 billion in AUM and charges 13 bps in fees per year from investors. AAPL makes up for roughly 13.6% of assets. It has a Zacks ETF Rank #2 and has added 7% in the same time frame (read: How to Invest in the Hottest Technologies With ETFs).

Vanguard Information Technology ETF VGT

This fund manages about $18.8 billion in its asset base with 13.9% allocation in Apple. It has 0.10% in expense ratio and has a Zacks ETF Rank #2. VGT is up 7.5% in the same time frame.

MSCI Information Technology Index ETF FTEC

With AUM of $1.7 billion, the product allocates 12.8% in Apple. The ETF has 0.08% in expense ratio and a Zacks ETF Rank #2. It has gained 7.5%.

iShares Edge MSCI Multifactor Technology ETF TCHF

This ETF targets companies that have the potential to outperform the broad U.S. technology sector. Apple accounts for 12.4% of the portfolio. TCHF charges 35 bps in fees per year and has attracted $8.1 million in its asset base. It has added 4.9% in the same time frame and carries a Zacks ETF Rank #2.

iShares Global Tech ETF IXN

This ETF provides global exposure to electronics, computer software and hardware, and informational technology companies, with Apple making up for 11.3% share in the basket. It has $1.5 billion in AUM and charges 48 bps in fees per year. The fund is up 7.1% so far this year.

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