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Should You Buy Apple ETFs Ahead of Q3 Earnings?

Sweta Killa

Technology giant Apple AAPL is set to release third-quarter fiscal 2019 results on Jul 30 after market close. Since Apple accounts for more than 19% of total market capitalization of the entire technology sector in the S&P 500 Index, it is worth taking a look at its fundamentals ahead of its quarterly results.

Apple has returned about 31.7% over the past three months, slightly outperforming the industry’s gain of 31.1%. The momentum may continue if the company beats estimates in the soon-to-be reported quarter.

Inside Our Methodology

Apple has a Zacks Rank #3 (Hold) and an Earnings ESP of +2.29%. According to our surprise prediction methodology, the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 and a positive Earnings ESP raises the possibility of a beat. A Zacks Rank #4 (Sell) or 5 (Strong Sell) stock is best avoided going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Apple saw no earnings estimate revision over the past 30 days for the fiscal third quarter and positive earnings estimate revision of a penny over the past 90 days. The company has a strong track of positive earnings surprise. It delivered an average positive earnings surprise of 4.04% in the trailing four quarters. It is expected to post earnings decline of 10.3% but revenues are likely to increase 0.09% in the fiscal third quarter (read: What's In Store for FAANG ETFs in Q2 Earnings?).

Apple Inc. Price, Consensus and EPS Surprise

Apple Inc. Price, Consensus and EPS Surprise

Apple Inc. price-consensus-eps-surprise-chart | Apple Inc. Quote

Though AAPL has a solid Value Score of B, its Momentum Score of F is disappointing. The stock belongs to a top-ranked Zacks Industry (top 39%).

According to the analysts polled by Zacks, Apple has an average target price of $213.35 with nearly 56% of the analysts having a Strong Buy or a Buy rating ahead of its earnings.

What to Watch?

Apple’s iPhone sales are expected to remain subdued given lower upgrades, sluggish demand in Greater China, and U.S.-China trade tensions.

ETFs in Focus

Given this, ETFs having the highest allocation to this tech titan will be in focus going into its earnings announcement. While there are several ETFs in the space with Apple in their top 10 holdings, we have highlighted the ones that have Apple as the top or the second firm with a double-digit allocation (see: all the Technology ETFs here):

Select Sector SPDR Technology ETF XLK – The fund has AUM of $22.3 billion and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook. Apple makes up for 16.5% of assets (read: 5 Stocks That Drove Tech ETF to an All-Time High).

MSCI Information Technology Index ETF FTEC – This fund has a Zacks ETF Rank #1 with a Medium risk outlook and has AUM of $2.6 billion. Apple has 14.9% allocation.

Vanguard Information Technology ETF VGT – It has AUM of $21.4 billion and sports a Zacks ETF Rank #1 with a Medium risk outlook. Here, AAPL takes 14.9% share (read: Tech ETFs Brush Aside Antitrust-Led Slump to Hit Highs).

iShares Dow Jones US Technology ETF IYW – The fund has amassed $4.3 billion in its asset base and carries a Zacks ETF Rank #1 with a Medium risk outlook. Apple accounts for 14.6% of the assets.

iShares Global Tech ETF IXN - The product has accumulated $2.8 billion in its asset base. Apple accounts for 13.1% allocation.

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