Currently, investors are fleeing from the Internet darlings on
valuation and earnings concerns and are embracing the traditional
tech giants like Intel (
), Hewlett-Packard (
), Microsoft (
) and Oracle (
Out of these, Intel reported its Q1 earnings after the market
closed yesterday. Though the world's largest chipmaker missed
slightly on the revenue front, it reported higher-than-expected
earnings and gave an inspiring second quarter revenue outlook. This
suggests an air of optimism in the sector, compelling many to look
to this old-fashioned company amid weakness in the broad space
3 ETFs with Most Exposure to Microsoft
Intel Earnings in Focus
The company reported earnings of 38 cents per share, a penny above
the Zacks Consensus Estimate but 2 cents below the year-ago
earnings. Revenues rose 1% year over year to $12.76 billion and
missed the Zacks Consensus Estimate of $12.82 billion. Strong
demand for tablet processors and data center services was offset by
still weak PC sales. This is because more than 80% of revenues
still come from PC and server chips.
Intel plans to introduce chips for tablets and other popular
devices and build chips for the other companies as well in order to
offset slowing PC sales. In particular, the company is seeing
strong sales for chips that powers the 'Internet of Things', which
includes a huge array of household, retail, industrial, automotive
and other gadgets that are being computerized and linked together.
Revenues climbed 32% in this division during the quarter.
Intel expects revenues in the range of $12.5-$13.5 billion for the
second quarter of 2014. The midpoint is higher than the Zacks
Consensus Estimate of $12.97 billion. Gross margin is expected to
be around 63%. For full fiscal 2014, revenue growth will likely
remain flat year over year and gross margin would be around 61%.
Following earnings announcement, INTC shares rose nearly 3% in the
after-market hours, sending the stock to its highest level in more
than four years. In fact, the stock is up 4% so far this year when
compared to 3.4% drop in the tech-heavy Nasdaq Composite Index.
This reflects bullishness for the company in the days ahead (read:
Technology ETFs: Pain or Gain Ahead?
This is particularly true as the stock had a solid industry Rank
(in the top 25%) at the time of writing as per the
Zacks Industry Rank
. Further, INTC currently has a Zacks Rank #3 (Hold), suggesting
room for upside in the coming months.
ETFs to Consider
Investors seeking to tap the opportunity for the upcoming surge in
INTC shares could consider the following ETFs. These funds have
larger allocation to this biggest semiconductor company and are
poised to move higher with the rise in stock price.
Market Vectors Semiconductor ETF (
This is easily the most popular and liquid ETF in the semiconductor
space with AUM of $331.1 million and average daily volume of
roughly 1.4 million shares. The fund provides concentrated exposure
to 26 global securities by tracking the Market Vectors US Listed
Semiconductor 25 Index. Intel occupies the top position with 17.76%
While U.S. firms dominate the fund holdings at 73.8% of assets,
Taiwan (12.6%), the Netherlands (8.5%) and United Kingdom (5.1%)
take the remainder in terms of country exposure. The fund charges
an expense ratio of 0.35%. The fund lost around 3.5% over the past
10 days and has a Zacks ETF Rank of 2 or 'Buy' rating with a
'Medium' risk outlook.
iShares PHLX Semiconductor ETF (
This ETF follows the PHLX SOX Semiconductor Sector Index and offers
exposure to 31 firms. The fund has amassed $414.3 million in its
asset base while trades in volume of more than 148,000 shares a
day. The product charges a higher fee of 48 bps a year from
all the Technology ETFs here
Here again, INTC takes the top spot at 8.55% of total assets. The
fund lost nearly 4.6% in the past 10 trading sessions and currently
has a Zacks Rank of 2 or 'Buy' rating with a 'High' risk outlook.
First Trust NASDAQ Technology Dividend Index Fund (
This fund provides exposure to the dividend payers of the broad
technology space by tracking the Nasdaq Technology Dividend Index.
The product has amassed about $463.9 million in its asset base
while charges 50 bps in annual fees. Volume is good as it exchanges
about 134,000 shares in hand per day (read:
3 Excellent Dividend ETFs for Growth and Income
In total, the fund holds about 89 securities in its basket. Of
these firms, INTC takes the first spot, making up roughly 8.41% of
the assets. In terms of industrial exposure, the fund allocates
one-fourth portion in semiconductor and semiconductor equipment,
followed by software (15.52%), and technology hardware, storage
& peripherals (15.04%). The fund is down nearly 2% over the
past 10 days.
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HEWLETT PACKARD (HPQ): Free Stock Analysis
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