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Buy Top-Ranked Apple ETFs on Solid Earnings

Technology giant Apple Inc. AAPL encouraged investors with solid third-quarter fiscal 2017 results after the closing bell yesterday. The company surpassed our earnings and revenue estimates, and offered an upbeat outlook for the fourth quarter.

In addition, Apple signaled that its upcoming 10th-anniversary phone lineup is on schedule, erasing all concerns about the possible delays of the high-end iPhone that recently took a toll on its shares. As a result, shares of AAPL jumped as much as 6.3% in aftermarket hours to fresh highs.

Apple Q3 Results in Focus

Earnings per share came in at $1.67, beating the Zacks Consensus Estimate by a dime and improving from the year-ago earnings of $1.42. Revenues grew 7.1% year over year to $45.41 billion and edged past our estimate of $44.71 billion. This marks the third consecutive quarter of accelerating growth (read: Top ETF Stories of July 2017).

Stronger-than-expected iPhone sales as well as strong revenues from service unit, which includes AppleCare, Apple Pay, and Apple Music, were credited to the robust performance.

Apple sold 41.03 million iPhones in the fiscal third quarter, up 1.6% year over year and above the Wall Street estimate of 40.7 million units. This has resulted in total revenue of $24.85 billion, representing a 3% increase from the year-ago quarter and accounting for 63% of total revenue. Meanwhile, Service revenue reached a record of $7.3 billion, up 21.6% from the year-ago quarter.

Re-energizing iPad and Mac sales also contributed to revenue growth. This is especially true as iPad sales surprisingly grew 15% to 11.42 units, reversing the long streak of annual declines. In fact, the quarter marked the first increase in iPad’s year-over-year quarterly sales since 2014. Unit sales for Mac desktop computers rose 1% year over year to 4.29 units.

The ubiquitous gadget-maker foresees revenues in the range of $49–$52 billion for the fiscal fourth quarter. The lower end is much above the current Zacks Consensus Estimate of $49.15 billion and expectation of $49.21 billion of analysts polled by Thomson Reuters.

Apple currently has a Zacks Rank #3 (Hold) and belongs to a solid Industry Rank in the top 23%, suggesting significant upside for the stock over the coming days. Further, Apple flaunts a solid Value Style Score of B and a Growth Style Score of C.

ETFs in Focus

Given this, investors seeking to tap the bullish trend on the tech titan could consider the following ETFs. These funds have Apple as their top firm with a double-digit allocation and a solid Zacks ETF Rank of 1 (Strong Buy) or 2 (Buy) (see: all the Technology ETFs here):

iShares Dow Jones US Technology ETF IYW

This ETF provides investors exposure to technology stocks with 16.5% allocation in Apple. The fund has AUM of $3.6 billion and charges 44 bps in fees and expenses. It has a Zacks ETF Rank of 1 and has gained 21.5% so far this year.

Select Sector SPDR Technology ETF XLK

This most popular technology ETF has $17.1 billion in AUM and charges 14 bps in fees per year from investors. AAPL makes up for roughly 14.7% of assets. It has a Zacks ETF Rank of 2 and has added 19.7% in the same time frame.

Vanguard Information Technology ETF VGT

This fund manages about $13.9 billion in its asset base with 14% allocation in Apple. It has 0.10% in expense ratio and has a Zacks ETF Rank of 2. VGT is up 22% in the same time frame (read: Technology ETF Hits New 52-Week High).

MSCI Information Technology Index ETF FTEC

With AUM of $1 billion, the product allocates 13.9% in Apple. The ETF has 0.08% in expense ratio and a Zacks ETF Rank of 2. It has gained 21.8%.

iShares Edge MSCI Multifactor Technology ETF TCHF

This ETF targets companies that have the potential to outperform the broad U.S. technology sector. Apple accounts for 13.5% of the portfolio. TCHF charges 35 bps in fees per year and has attracted $3.6 million in its asset base since its debut 15 months ago. It has added 18.6% in the same time frame.

iShares Morningstar Large-Cap ETF JKD

With AUM of $863.6 million and expense ratio of 0.20%, this ETF targets the large cap segment of the broad U.S. stock market. Apple accounts for 13.4% share in the basket. The product is up 12.4% so far this year and has a Zacks ETF Rank of 2 (read: 5 ETFs & Stocks to Tap At New Heights).

PowerShares QQQ QQQ

This ETF provides exposure to the largest domestic and international non-financial companies listed on the Nasdaq. Apple makes up for 11.5% allocation. QQQ is one of the largest and the most popular ETFs in the large cap space with AUM of $51.6 billion. It charges investors 20 bps in annual fees and has surged 21.7% so far this year. The fund has a Zacks ETF Rank of 1.

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Apple Inc. (AAPL): Free Stock Analysis Report
 
SPDR-TECH SELS (XLK): ETF Research Reports
 
NASDAQ-100 SHRS (QQQ): ETF Research Reports
 
FID-INFOTEC (FTEC): ETF Research Reports
 
ISHRS-EMS M TEC (TCHF): ETF Research Reports
 
VIPERS-INFO TEC (VGT): ETF Research Reports
 
ISHARS-US TECH (IYW): ETF Research Reports
 
ISHARS-MO LC (JKD): ETF Research Reports
 
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