ETFs in Focus on Apple's First Earnings Miss Since 2016

Apple Inc. AAPL reported dismal first-quarter fiscal 2023 results as it missed the Zacks Consensus Estimate for earnings for the first time since 2016. The tech giant posted its largest year-over-year quarterly revenue decline since 2019 and the biggest annual quarterly revenue drop since September 2016. A strong dollar, production issues in China affecting the iPhone 14 Pro and iPhone 14 Pro Max, and the overall macroeconomic environment were the major culprits.

Apple dropped 5% in after-market hours on elevated volume. As such, ETFs having the largest allocation to the tech titan have been in focus in the days ahead. Technology Select Sector SPDR Fund XLK, Vanguard Information Technology ETF VGT, MSCI Information Technology Index ETF FTEC and iShares US Technology ETF IYW have Apple as the top firm with a double-digit allocation and carry a Zacks Rank #2 (Buy).

Apple Earnings in Focus

Earnings per share came in at $1.88, missing the Zacks Consensus Estimate by 5 cents and declining 10.9% from the year-ago earnings. Revenues dropped 5.5% year over year to $117.1 billion and fell short of the estimated $121 billion. The worst performance came on the back of lower shipments of Apple’s high-end iPhones, which were hit by an outbreak of COVID-19 at an assembly hub run by partner Foxconn in Zhengzhou (read: What Lies Ahead for China ETFs in the Year of Rabbit?).

iPhone sales declined 8.1% to $65.8 billion, while Mac sales dropped 28.7% to $7.7 billion. Revenues from Wearables, Home and Accessories, which include Apple Watch, AirPods, HomePod, Apple TV and Beats headphones, declined 8% to $13.8 billion. However, Services revenues, comprising iTunes, Apple Music, iCloud, Apple Pay and Apple Care, soared 6.4% year over year to a record $20.8 billion, while iPad sales climbed 29.7% to $9.4 billion.

The tech giant expects fiscal second-quarter year-over-year revenue growth to be similar to the first quarter, adding that sales of Macs and iPads would probably fall by double digits in part because of a “challenging” economic environment.

ETFs to Buy

Technology Select Sector SPDR Fund (XLK)

Technology Select Sector SPDR Fund targets the broad technology sector and follows the Technology Select Sector Index. It holds about 76 securities in its basket, with Apple making up for a 22% share. Technology Select Sector SPDR Fund has key holdings in software, technology hardware, storage & peripherals, semiconductors & semiconductor equipment and IT services (read: 5 Tech ETFs Riding High on Sectors' Comeback to Start 2023).

Technology Select Sector SPDR Fund is the most popular and heavily traded ETF, with AUM of $40.7 billion and an average daily volume of 6 million shares. The fund charges 10 bps in fees per year.

Vanguard Information Technology ETF (VGT)

Vanguard Information Technology ETF manages about $42.6 billion in its asset base and provides exposure to 368 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, Apple accounts for a 20.4% share. Systems software, technology hardware, storage & peripheral, and semiconductors are the top three sectors.

Vanguard Information Technology ETF has an expense ratio of 0.10%, while volume is solid at nearly 696,000 shares.

MSCI Information Technology Index ETF (FTEC)

MSCI Information Technology Index ETF is home to 367 technology stocks with AUM of $5.4 billion. It follows the MSCI USA IMI Information Technology Index. Apple accounts for a 20.4% allocation.

MSCI Information Technology Index ETF has an expense ratio of 0.08%, while volume is solid at 173,000 shares a day (see: all the Technology ETFs here).

iShares US Technology ETF (IYW)

iShares Dow Jones US Technology ETF tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, giving investors exposure to 140 U.S. electronics, computer software and hardware, and informational technology companies. Apple makes up for a 17.4% of the assets.

iShares Dow Jones US Technology ETF has AUM of $8.7 billion and charges 39 bps in fees and expenses. Volume is good as it exchanges 482,000 shares a day.

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Vanguard Information Technology ETF (VGT): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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