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Tech ETF Temptation Despite Apple Downgrade

This article was originally published on ETFTrends.com.

The Technology Select Sector SPDR Fund (XLK) , the largest technology ETF by assets, and rival tech ETFs were pressured Monday after another analyst downgraded shares of Apple.

Rosenblatt Securities, the second firm to issue a downgrade, changed their rating from “buy” to “neutral,” citing that higher iPhone prices won’t offset a weaker sales volume. Bank of America Merrill Lynch issued a similar downgrade following the earnings report for “slower growth in app store revenue, especially in China; guidance for the December quarter that implies weaker-than-expected iPhone unit sale; investors will likely interpret ending iPhone unit sales figures as negative; and weaker growth in emerging markets because of the stronger dollar.”

Even with the pressure on Apple, the largest component in a slew of cap-weighted technology ETFs, some technical analysts see opportunity in the sector.

“Technically, we've been able to recoup a lot of that damage that's been done over the last couple weeks. And so [tech sector ETF] XLK for me is still an area you want to be in near term. I'd look to buy any dips like we're seeing, thinking that into the midterms and throughout November and December we could see some further upward progress,” said Newton Advisors President Market Newton in an interview with CNBC.

Apple Stock Issues

Last week, Apple reported that it posted a quarterly revenue of $62.9 billion, which represented a 20% jump from the same time a year ago, as well as, a quarterly earnings per diluted share of $2.91–a rise of 41%. Earlier this year, Apple became the first U.S. company to cross the $1 trillion market value level.

“Apple is far from a sell at this juncture, said Michael Bapis, managing director with Vios Advisors at Rockefeller Capital Management,” reports CNBC. “He said investors likely 'panicked' around Apple's earnings report, and he would stick with the name in the long term.”

Apple and Microsoft combine for over 37% of XLK's weight. XLK provides “exposure to companies from technology hardware, storage, and peripherals; software; communications equipment; semiconductors and semiconductor equipment; IT services; and electronic equipment, instruments and components,” according to State Street.

“Bapis added that he also sees opportunity in shares of Microsoft because of the company's cloud business,” reports CNBC.

For more information on the market sectors, visit our sector ETFs category.

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