A Feast of ETFs with Apple on Plate
Apple AAPL is the hottest stock of 2017. This is especially true as the technology giant has scaled multiple highs this year that has pushed its market capitalization to over $800 billion for the first time. This is the biggest valuation among U.S. companies. Notably, the stock has rallied nearly 32% in the year-to-date timeframe, easily crushing the Zacks Industry Computer-Mini Market (see: all the Technology ETFs here).
The most recent rally came from the bullishness shown by the Oracle of Omaha and the highly optimistic report from analyst Brian White of investment firm Drexel Hamilton. Brian White raised the price target on Apple from $185 to $202, citing that the iPhone maker is "one of the most under-appreciated stocks in the world.” This represents the highest price target ever on Wall Street and gives Apple a valuation of $1.053 trillion for the next 12 months.
Warren Buffett’s Berkshire Hathaway, in its recent 10-Q filing, disclosed that it more than doubled its stake in the technology giant to $19.2 billion on March 31, 2017 from $7.1 billion as of December 31, 2016.
Glance at Q2 Earnings
Earnings per share came in at $2.10, easily trumping the Zacks Consensus Estimate of $2.02 and improving 10.5% from year-ago earnings. Revenues increased 4.6% year over year to $52.9 billion and beat our estimate of $52.6 billion. Apple sold fewer 50.8 million iPhones last quarter, down from 51.2 million sold in the year-ago quarter. The slowdown suggests customers’ enthusiasm over iPhone 8, slated to launch in September.
For the third quarter of fiscal 2017, the gadget-maker forecasts revenues in the range of $43.5 billion to $45.5 billion.
Solid Growth Prospects
The 3D sensor iPhone 8 would be a game changer for the technology giant that will put the company on a solid growth trajectory. Further, Apple is expected to get a boost under the Trump administration’s tax policies on foreign cash repatriation. This is because the iPhone maker is sitting on more than $250 billion in cash piles, the majority of which is held overseas (read: 4 ETFs to Profit Out of Cash Kings).
If White House introduces a one-time tax holiday or reduction then Apple could bring this cash back home and could spend billions of dollars on dividend payments and stock buybacks. Additionally, the company could be a big acquirer with its cash reserve and enter the social media space by acquiring Twitter TWTR or Snap SNAP or expand into media and entertainment by buying out Time Warner TWX. It could also buy a ride-sharing platform and a major self-driving car player Uber, tech giant Sony SNE, or Airbnb.
Solid Fundamentals
Apple has seen rising earnings estimate revisions from $8.92 to $8.97 per share for the full fiscal year over the past three months. This represents substantial growth of 7.96% compared with the industry average of 4.49%. Revenue is also expected to grow 5.22%, higher than the industry average growth of 4.63%.
The stock is currently trading at a PEG ratio of 1.68, much lower than the industry average of 2.84, suggesting that it is a better value stock in the industry. The lower the PEG ratio, the better the value as investors would be paying less for each unit of earnings growth. According to the analysts polled by Zacks, Apple has an average target price of $148.36 with nearly 77% having a Strong Buy or a Buy rating.
Apple currently has a Zacks Rank #3 (Hold) and a solid Industry Rank (in the top 41%) at the time of writing, suggesting significant upside for the stock over the coming days. Further, the stock has a solid Value and Momentum Style Score of ‘B’ each (read: 5 Hottest Tech ETFs of 2017).
ETFs to Buy
Given that the bullish trend is likely to continue in the months ahead, investors should bet on the tech titan for lower risk. For them, we have highlighted several ETFs that have Apple in their top holdings with a double-digit allocation.
iShares Dow Jones US Technology ETF IYW
This ETF provides investors exposure to technology stocks with 17.7% allocation in Apple. The fund has AUM of $3.5 billion and charges 43 bps in fees and expenses. It has a Zacks ETF Rank of 2 or ‘Buy’ rating and has gained 17.7% so far this year.
Select Sector SPDR Technology ETF XLK
This most popular technology ETF has $17.4 billion in AUM and charges 14 bps in fees per year from investors. AAPL makes up for roughly 15.5% of assets. It has a Zacks ETF Rank of 2 and has added 14.6% in the same time frame (read: Trump's First 100 Days: 5 Must See ETF Charts).
Vanguard Information Technology ETF VGT
This fund manages about $12.8 billion in its asset base with 14.7% allocation in Apple. It has 0.10% in expense ratio and has a Zacks ETF Rank of 2. VGT is up 16.7% in the same time frame.
MSCI Information Technology Index ETF FTEC
With AUM of $876.2 million, the product allocates 14.6% in Apple. The ETF has 0.08% in expense ratio and a Zacks ETF Rank of 2. It has gained 16.5% (read: Technology ETFs Set to Rally on Q1 Earnings).
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 14.4% of the portfolio. TCHF charges 35 bps in fees per year and has attracted $3.5 million in its asset base since its debut a year ago. It has added 15.5% in the same timeframe.
iShares Morningstar Large-Cap ETF JKD
With AUM of $829.3 million and expense ratio of 0.20%, this ETF targets the large cap segment of the broad U.S. stock market. Apple accounts for 13.5% share in the basket. The product is up 9.3% so far this year and has a Zacks ETF Rank of 3 or ‘Hold’ rating (read: Large Cap ETF Tops $100 billion in AUM).
iShares Global Tech ETF IXN
This product provides broad exposure to technology stocks from around the world with Apple accounting for 13.3% of assets. The ETF has amassed $1.1 billion in its asset base and charges 47 bps in annual fees. It has gained 18.5% in the year-to-date timeframe.
PowerShares QQQ QQQ
This ETF provides exposure to the largest domestic and international non-financial companies listed on the Nasdaq. Apple makes up for 12.3% allocation. QQQ is one of the largest and the most popular ETFs in the large cap space with AUM of $50.1 billion. It charges investors 20 bps in annual fees and has surged 16.6% so far this year. The fund has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating (read: 5 Must-Watch ETFs as Nasdaq Hits 6,000).
Horizons Nasdaq 100 Covered Call ETF QYLD
This product follows the buy-write strategy with Apple taking 12% share. It has $78.8 million in AUM and charges 0.60% in expense ratio. QYLD has added 7.9% so far this year.
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Time Warner Inc. (TWX): Free Stock Analysis Report
Twitter, Inc. (TWTR): Free Stock Analysis Report
Snap Inc. (SNAP): Free Stock Analysis Report
Sony Corp Ord (SNE): Free Stock Analysis Report
Apple Inc. (AAPL): Free Stock Analysis Report
SPDR-TECH SELS (XLK): ETF Research Reports
NASDAQ-100 SHRS (QQQ): ETF Research Reports
FID-INFOTEC (FTEC): ETF Research Reports
ISHRS-EMS M TEC (TCHF): ETF Research Reports
VIPERS-INFO TEC (VGT): ETF Research Reports
ISHARS-US TECH (IYW): ETF Research Reports
ISHARS-GLB TECH (IXN): ETF Research Reports
ISHARS-MO LC (JKD): ETF Research Reports
HZN-NDQ1 COV CL (QYLD): ETF Research Reports
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