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Tech ETFs in Focus Ahead of Apple Q4 Earnings

Sweta Killa
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Technology giant Apple AAPL is set to release fourth-quarter fiscal 2018 results on Nov 1 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 5.9% over the past three months, underperforming the industry’s rally of 7.1%. The momentum is expected to continue as the company is likely to beat estimates in the soon-to-be reported quarter (read: Why to Cash in on the Slump & Grab Tech ETFs).

Inside Our Methodology

Apple has a Zacks Rank #3 (Hold) and an  Earnings ESP of +1.35%. 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 has seen positive earnings estimate revision of a couple of cents over the past seven days for the fiscal fourth quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a pretty good indicator for the stock. The company also has strong track record of positive earnings surprise. It delivered an average positive earnings surprise of 5.46% in the trailing four quarters. It is expected to post substantial earnings growth of 34.78% and revenue growth of 16.95% in the fiscal fourth quarter. Though AAPL has a solid Growth Score of B, its Value and Momentum Score of C each is disappointing. The stock belongs to a top-ranked Zacks Industry (top 43%).

According to the analysts polled by Zacks, Apple has an average target price of $237.91 with more than half of the analysts having a Strong Buy or a Buy rating ahead of its earnings. This indicates nearly 11.5% upside to the current price of AAPL (read: FAANG ETFs Face Off Amid New Tariffs: Apple Vs. Amazon).

What to Watch?

Investors will closely watch sales of the recently released iPhone models and the guidance for the holiday quarter.

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 five technology funds that have Apple as their top firm (see: all the Technology ETFs here):

Select Sector SPDR Technology ETF XLK – The fund has AUM of $20.1 billion and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook. Apple accounts for 21.2% share.

iShares Dow Jones US Technology ETF IYW – The fund has amassed $4 billion in its asset base and carries a Zacks ETF Rank #1 with a Medium risk outlook. Apple makes up for 18.5% of the assets.

Vanguard Information Technology ETF VGT – It has AUM of $20.8 billion and sports a Zacks ETF Rank #1 with a Medium risk outlook. Here, AAPL takes 18% share (read: Best ETF Strategies for Q4 & Tech Reshuffle).

MSCI Information Technology Index ETF FTEC – This fund has a Zacks ETF Rank #1 with a Medium risk outlook and has AUM of $2.4 billion. Apple has 15.8% allocation.

iShares Global Tech ETF IXN - The product has accumulated $2.5 billion in its asset base. Apple accounts for 16.9% allocation (read: Rampant Global Rate Hikes Put Spotlight on These ETFs).

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