reported its first quarter fiscal 2014 results after the bell
yesterday. Though the company surpassed our estimates on the
earnings front, lower-than-expected holiday iPhone sales and weak
revenue guidance disappointed investors.
Apple Results in Focus
Earnings per share came in at $14.50, which comfortably surpassed
the Zacks Consensus Estimate of $14.04 and improved from the
year-ago earnings of $13.81. Revenues rose 5.7% year over year to
$57.6 billion, but missed our estimate of $57.735 billion. Gross
margin was 37.9%, higher than the company's expectation of
Apple sold a record 51 million iPhones compared to 47.8 million in
the year-ago quarter. However, the number fell short of the Wall
Street estimate of 55 million iPhones. The company also sold a
record 26 million iPads (read:
3 Apple-Focused ETFs to Buy This Holiday Season
The ubiquitous gadget-maker sees revenues in the range of $42-$44
billion for the current quarter; the midpoint is lower than the
Zacks Consensus Estimate of $46.03 billion and the Wall Street
expectation of $46.1 billion. This was particularly surprising
given that the company started selling iPhones 5S and 5C in China
for the first time effective January 17.
Last month, the company reached a deal with the world's largest
carrier, China Mobile (
), which is expected to provide access to over 700 million
customers in the second-largest economy in the world. This deal
will likely be a boon for the company's top-line growth.
Further, Apple expects gross margin in the range of 37-38% for the
second quarter (read:
Best ETF Strategies for 2014
Based on soft iPhone sales during the holiday shopping season and
sluggish revenue guidance, Apple shares plunged more than 8% in
after-market hours on heavy volume. This suggests rough trading for
some of the ETFs having the largest allocation to this giant.
However, the stock has a Zacks Rank #2 (Buy), suggesting that the
outlook for AAPL is not bad and that it still has room for upside.
Given this, investors should closely monitor the movement in the
technology-focused ETFs and could catch the opportunity from any
dip in AAPL price.
Below, we have highlighted some of the ETFs having double-digit
exposure to Apple and could be in focus in the coming days (see:
all the Technology ETFs here
ETFs to Watch
iShares Dow Jones US Technology ETF (
This ETF tracks the Dow Jones US Technology Index, giving investors
exposure to the broad technology space. The fund holds 143 stocks
in its basket with AUM of $3.1 billion while charging 45 bps in
fees and expenses. Volume is moderate as it exchanges nearly
283,000 shares a day.
Apple occupies the top position in the basket with 16.91% of
assets. The product is heavily skewed toward the technology
hardware and equipment segments, as these make up for more than
half of the portfolio. Software and computer services take the
remaining portion in the basket.
The fund lost over 2% in the year-to-date time frame and has a
Zacks ETF Rank of 2 or 'Buy' with a 'High' risk outlook.
Select Sector SPDR Technology ETF (
The most popular technology ETF on the market, XLK follows the
S&P Technology Select Sector Index. This fund manages over $13
billion in its asset base and trades in heavy volume of roughly 6.6
million shares a day. The ETF charges 18 bps in fees per year from
3 Hot Sector ETFs for 2014
In total, the fund holds about 73 securities in its basket. Of
these firms, AAPL takes the first spot, making up roughly 14.42% of
the assets. In terms of industrial exposure, the fund is widely
spread across computer & peripherals, IT services, software,
Internet software & services and diversified telecom services
that make up for double-digit allocation.
The fund is down over 2.6% year-to-date. XLK currently has a Zacks
ETF Rank of 3 or 'Hold' with a 'Medium' risk outlook.
Vanguard Information Technology ETF (
This fund manages $4.6 billion in asset base and provides exposure
to a large basket of 414 technology stocks by tracking the MSCI US
Investable Market Information Technology 25/50 Index. The ETF has
0.14% in expense ratio while volume is moderate.
Again here, AAPL is the top firm with 13.7% allocation. From a
sector perspective, Internet software & services and computer
hardware take the largest share with at least 16% each, closely
followed by system software (13.50%), data processing &
outsourced services (10.40%) and semiconductors (10.30%).
VGT lost 2.6% year-to-date and has a Zacks ETF Rank of 1 or 'Strong
Buy' with a 'Low' risk outlook (see: all the
Due to a heavy allocation to Apple, the three products could see
choppy trading in the next few sessions. Investors should
definitely cash in on any dip in the prices of these funds
resulting from Apple results given that the trio has decent ranks
and has the potential to outperform, or perform on par with the
broad market, in the coming months.
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APPLE INC (AAPL): Free Stock Analysis Report
ISHARS-US TECH (IYW): ETF Research Reports
VIPERS-INFO TEC (VGT): ETF Research Reports
SPDR-TECH SELS (XLK): ETF Research Reports
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