Apple Earnings, iPhone Sales Lift Nasdaq-100 and Tech ETFs

ETF Trends

The Nasdaq-100 PowerShares QQQ (QQQ) and tech ETFs opened higher Wednesday following better-than-expected quarterly earnings from Apple (AAPL) and strong iPhone sales.

Apple shares were up nearly 5% in early trading Wednesday, while QQQ rose about 1%. AAPL represents almost 12% of the Nasdaq-100 fund, while iShares US Technology ETF (IYW) has nearly 16% in the stock. IYW was higher by 1.4%.

“To us, Apple’s third-quarter earnings report is encouraging, as solid fiscal results and the disclosure of a whopping $16 billion in stock buybacks more than offset a modestly disappointing September-quarter forecast,” said Morningstar analyst Brian Colello in a note. [Investors Shares Rally with Nasdaq-100 ETF]

Apples shipments of iPhone units rose 20% from the year-ago quarter and topped Wall Street estimates, while iPad unit sales fell 14%. [Nasdaq, Tech ETFs in the Groove]

“Although many were concerned that premium smartphone growth has stagnated, we think Apple’s results are in line with our long-term thesis that the high-end of the market isn’t dead just yet,” Colello said. “We think that Apple’s enormous $16 billion stock buyback this quarter was a good use of capital, as we continue to believe that the company’s stock is undervalued.”

However, Apple’s revenue forecast for the September quarter was below estimates. [Nasdaq ETF Highest Since 2000 After Streak]

“Similar to the timing of product launches in 2012, we think Apple’s forecast implies a new iPhone launch at the very end of the September quarter, at best,” the Morningstar analyst said. “We’d be very encouraged by this forecast if it turns out that no new products hit the market in September, as it would imply less lumpiness around Apple’s product sales.”

Apple’s guidance fell beneath expectations “as it becomes increasingly clear that planned new ‘Fall’ products will either too late in the quarter to have an impact, or will not launch until [the fiscal first quarter of 2014],” added analysts at Hudson Square Research.

Full disclosure: Tom Lydon’s clients own AAPL and QQQ.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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