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Take a Bite of Apple With These ETFs on Solid Earnings

Sweta Killa

Apple Inc. AAPL cheered investors with robust second-quarter fiscal 2019 results wherein it topped both earnings and revenue estimates. The technology giant also offered an encouraging guidance for the ongoing quarter. This has sparked a rally in Wall Street and swept away negative sentiments over the slowdown in iPhone sales (read: 5 Top-Ranked Stocks in S&P 500 ETF Up More Than 50%).

Apple Q2 Results in Focus

Earnings per share came in at $2.46, beating the Zacks Consensus Estimate by 9 cents but declining 9.9% from the year-ago earnings. Revenues dropped 5.1% year over year to $58.02 billion but edged past the estimate of $57.55 billion.

Although iPhone sales declined 17% year over year, all-time record sales in Services, and momentum in iPad, and Wearables, Home and Accessories led to robust performance in the quarter. Services revenues, consisting iTunes, Apple Music, iCloud, Apple Pay and Apple Care, climbed 16% to a record $11.45 billion while revenues from Wearables, Home and Accessories, which cover every hardware business aside from iPhone, iPad and Mac, jumped 30% to $5.13 billion. iPad revenues increased 22%, marking the strongest iPad growth in six years. Apple's device install base also hit a new all-time high of more than 1.4 billion.

Management touted its services offerings as a new growth driver for the company amid lagging device demand and reiterated that it is on track to achieve the goal of doubling the size of Services business from 2016 to around 500 million paid subscribers by 2020. The company will now start charging subscription fee of $9.99 per month for Apple News+, which had been offered on free trial at launch. Other new subscription services — Apple TV+ and Apple Arcade — as well as the new Apple Card credit card will be rolled out this year (read: Should You Buy Apple ETFs Ahead of Q2 Earnings?).

Additionally, the company saw a rebound in iPhone sales in the past several weeks of the quarter, with an uptick in China sales. As such, the gadget-maker foresees total revenues in the range of $52.5-$54.5 billion for the third quarter of fiscal 2019. The high-end of the guidance is above the current Zacks Consensus Estimate of $52.37 billion.

Market Impact

Based on strong beat and outlook, shares of Apple climbed as much as 6% a day after the results that helped the company to reclaim the trillion dollar market cap. However, the stock closed at below this level. Impressed by Apple’s results, at least 15 Wall Street firms raised their price targets on the Apple stock. The average analyst target among 36 firms tracked by Bloomberg is now $213, up from $206 a day before earnings.

The stock currently has a Zacks Rank #3 (Hold) and belongs to a top-ranked Zacks industry (top 5%), suggesting some smooth trading based on quarterly results. However, it has a dismal VGM Score of D (see: all the Technology ETFs here).

ETFs to Tap

Given the bullish trends, investors should bet on the following ETFs with the largest allocation to the tech titan. These funds have Apple as the top or the second firm with a double-digit allocation and have Zacks Rank #1 (Strong Buy) or 2 (Buy) with a Medium risk outlook.

Select Sector SPDR Technology ETF XLK

This most-popular technology ETF has $21.1 billion in AUM and charges 13 bps in fees per year from investors. AAPL makes up for roughly 16.9% of assets.

iShares Dow Jones US Technology ETF IYW

This ETF provides investors exposure to the broad technology stocks, with 14.7% allocation in Apple. The fund has AUM of $4.2 billion and charges 43 bps in fees and expenses (read: U.S. Manufacturing Sector Grows in March: ETF & Stock Picks).

Vanguard Information Technology ETF VGT

This fund also targets the broad tech sector with 15.1% allocation in Apple. It has amassed $21.1 billion in its asset base while charging 10 bps in annual fees.

MSCI Information Technology Index ETF FTEC

With AUM of $2.4 billion, the product allocates 15% in Apple and has 0.08% in expense ratio.

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Apple Inc. (AAPL) : Free Stock Analysis Report
 
Technology Select Sector SPDR Fund (XLK): ETF Research Reports
 
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Vanguard Information Technology ETF (VGT): ETF Research Reports
 
iShares U.S. Technology ETF (IYW): ETF Research Reports
 
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