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Apple Beats, Guides Lower: ETFs in Focus

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After the closing bell yesterday, technology giant Apple Inc. (AAPL - Free Report) reported its fourth-quarter fiscal 2018 results wherein it topped both earnings and revenue estimates but provided weak guidance for the holiday quarter. The company also announced major changes to its reporting structure.

Apple Q4 Results in Focus

Earnings per share came in at $2.91, beating the Zacks Consensus Estimate by 12 cents and improving 41% from the year-ago earnings. Revenues grew 20% year over year to $62.9 billion and edged past the estimate of $62.5 billion. This represents the fifth consecutive quarter of double-digit revenue growth (see: all the Technology ETFs here).

The impressive results were driven primarily by a 29% increase in iPhone revenues and a 17% increase in revenues from the service unit, which includes iTunes, Apple Music, iCloud, Apple Pay and Apple Care. Though Apple sold 46.9 million iPhones in fiscal fourth quarter, slightly up from 46.7 million units in the year-ago quarter, higher prices continue to drive overall iPhone revenues. Revenues of other products, such as Apple TV, Watch and AirPods, increased 31%, Mac revenues grew 3% while iPad revenues dropped 15%.

Notably, Apple’s services have been growing for years and could become the company’s main revenue generator as iPhone sales plateau. The gadget-maker foresees revenues in the range of $89-$93 billion for the first quarter of fiscal 2019. The midpoint is below the current Zacks Consensus Estimate of $91.32 billion.

On its earnings call, Apple said that the company will no longer break out individual sales numbers for iPhone, iPad and Mac starting next quarter. The three main product lines will be wrapped into one reported revenue figure.

Market Impact

Following the results, shares of Apple dropped below its historic $1 trillion market cap, falling as much as over 7%. The stock currently has a Zacks Rank #3 (Hold) and belongs to a top-ranked Zacks industry (top 44%), suggesting significant upside over the coming days. Further, Apple flaunts a solid Growth and Momentum Score of B each (read: Why to Cash in on the Slump & Grab Tech ETFs).

ETFs to Tap

Given this, ETFs with the largest allocation to the tech titan could consider the following ETFs. These funds have Apple as their top firm with a double-digit allocation.

Select Sector SPDR Technology ETF XLK

This most-popular technology ETF has $20.1 billion in AUM and charges 13 bps in fees per year from investors. AAPL makes up for roughly 21.1% of assets. It has a Zacks Rank #1 (Strong Buy) with a Medium risk outlook.

iShares Dow Jones US Technology ETF IYW

This ETF provides investors exposure to the broad technology stocks, with 18.4% allocation in Apple. The fund has AUM of $4 billion and charges 43 bps in fees and expenses. It has a Zacks Rank #1 with a Medium risk outlook.

Vanguard Information Technology ETF VGT

This fund also targets the broad tech sector with 18% allocation in Apple. It has amassed $20.8 billion in its asset base while charges 10 bps in annual fees. VGT has a Zacks Rank #1 with a Medium risk outlook (read: Big Tech Sector Shake-Up Put These Stocks and ETFs in Focus).

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 16.8% share in the basket. It has $2.5 billion in AUM and charges 47 bps in fees per year.

MSCI Information Technology Index ETF FTEC

With AUM of $2.4 billion, the product allocates 15.7% in Apple. The ETF has 0.08% in expense ratio and has a Zacks Rank #1 with a Medium risk outlook.

iShares Morningstar Large-Cap ETF JKD

With AUM of $942.6 million, this product provides exposure to the large, established U.S. companies with Apple making up for 14.8% of assets. It charges 20 bps in fees per year and has a Zacks Rank #3 with a Medium risk outlook.

Invesco QQQ QQQ

This ETF provides exposure to the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization, with Apple accounting for 13.2% share in the basket. It has $67.9 billion in AUM and charges 20 bps in fees per year. The fund has a Zacks Rank #2 (Buy) with a Medium risk outlook (read: Top ETF Stories of October).

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