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Semiconductor ETFs to Buy as Intel Tops Earnings, Guides Up

Sweta Killa

Intel INTC, the world’s largest chipmaker, reported stronger-than-expected Q4 results after the market closed yesterday. The company surpassed our estimates for both revenues and earnings, and provided an upbeat outlook (read: Will Semiconductor ETFs Surprise Again in Q4 Earnings?).

Intel Q4 Earnings in Focus

Earnings of 79 cents per share came in four cents higher than the Zacks Consensus Estimate and improved from the year-ago earnings of 76 cents. Revenues rose 10% year over year to $16.37 billion and were well ahead of our estimated $15.76 billion.

Better-than-expected results were credited to robust revenues in data center business and Internet of Things as well as improved PC sales. Data center and Internet of Things revenues climbed 8% and 16% year over year, respectively, suggesting Intel's successful ongoing transformation to the company that powers the cloud and billions of smart, connected devices.

Going forward, Intel expects revenues in the range of $14.3–$15.3 billion and earnings per share of 60–70 cents for the first quarter of 2017. The midpoint is well above the current Zacks Consensus Estimate of $14.54 billion for revenues and 62 cents for earnings per share. For 2017, the company expects revenue to be flat with 2016 and earnings per share of $2.80, plus or minus 5%. The Zacks Consensus Estimate is currently pegged at $2.83 (see: all the Technology ETFs here).

Following the earnings release, shares of Intel rose as much as 3% in after-market hours on elevated volume. Smooth trading is expected to continue in the days ahead given that Intel has a Zacks Rank #3 (Hold) with a VGM Style Score of A and boasts a solid Industry Rank in the top 4%.

As a result, investors could tap solid Q4 Intel’s results and the upcoming surge in its share price with the help of ETFs that have a large allocation to the biggest semiconductor company.

VanEck Vectors Semiconductor ETF SMH

This is one of the popular and liquid ETFs in the semiconductor space with AUM of $431.5 million and average daily volume of roughly 2.7 million shares. The fund provides exposure to 26 global securities by tracking the MVIS US Listed Semiconductor 25 Index. Intel occupies the top position with 13.5% of assets. While U.S. firms dominate the fund’s holdings with 71.4% assets, Taiwan (12.5%), the Netherlands (9.3%) and Singapore (5.2%) round off to the top four in terms of country exposure. The fund charges an expense ratio of 0.35%. It has a Zacks Rank of 3 or ‘Hold’ rating with a High risk outlook.

First Trust Nasdaq Semiconductor ETF FTXL

This fund offers exposure to the 29 most-liquid U.S. semiconductor securities based on volatility, value and growth by tracking the Nasdaq US Smart Semiconductor Index. Holding 29 stocks in its basket, Intel is the second firm accounting for 7.9% share. FTXL debuted in the space four months ago and has already accumulated $8.4 million in AUM. Average trading volume is heavy at around 2.7 million shares and expense ratio comes in at 0.60% (read: Will Semiconductor ETFs Repeat This Year's Success in 2017?).

iShares PHLX Semiconductor ETF SOXX

This ETF follows the PHLX SOX Semiconductor Sector Index and offers exposure to 30 U.S. firms. The fund has amassed $795.3 million in its asset base and trades in volume of more than 534,000 shares a day. The product charges a fee of 47 bps a year from investors. Here, INTC takes the third spot with 8% allocation. The fund has a Zacks Rank of 2 or ‘Buy’ rating with a High risk outlook.

PowerShares Dynamic Semiconductors Fund PSI

This fund tracks the Dynamic Semiconductor Intellidex Index, holding 30 securities in the basket. Intel occupies the fifth position and makes up for 5% share in the basket. PSI has lower AUM of $130 million and sees a lower average daily volume of about 43,000 shares. It charges higher at 63 bps in annual fees and has a Zacks Rank of 2 with a High risk outlook (read: 4 Market Beating Sector ETFs & Stocks of 2016).

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