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ETFs in Focus as Big Tech Q3 Earnings Start to Unfold
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We are in the peak earnings season and the tech giants are in the spotlight this week. The five biggest technology stocks have witnessed mixed performances over the past three months with Alphabet (GOOGL - Free Report) and Microsoft (MSFT - Free Report) riding high, while Amazon (AMZN - Free Report) and Facebook are struggling to gain traction. Apple (AAPL - Free Report) has performed on par with the technology sector (read: 5 Tech ETFs Outperforming the Market This Year).
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These five companies currently account for about 23% of the total market capitalization of the S&P 500 Index. Total Q3 earnings from the group of five companies are expected to be up 24.3% on revenue growth of 25.1%. This reflects a deceleration from the Q2 earnings growth of 88% and revenue growth of 35.4%
Facebook came up with the mixed results, wherein it beat earnings estimates but lagged on revenues. after the market bell on Oct 25. Microsoft and Alphabet are scheduled to release their earnings on Oct 26 after market close while Apple and Amazon will report on Oct 28.
Microsoft
Microsoft has a Zacks Rank #2 (Buy) and an Earnings ESP of 0.00%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The stock witnessed no earnings estimate revision for the to-be-reported quarter over the past 30 days. The Zacks Consensus Estimate indicates substantial earnings growth of 13.19% and revenue growth of 18.09% from the year-ago quarter. Microsoft’s earnings track is impressive, with the last four-quarter earnings surprise being 16.94%, on average. The stock belongs to a top-ranked Zacks industry (top 39%) and has gained 7.5% over the past three months.
Alphabet
Alphabet has a Zacks Rank #2 and an Earnings ESP of +7.71%. It saw positive earnings estimate revision of a penny cents over the past 30 days for the to-be-reported quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The company’s earnings surprise track over the past four quarters is good with the beat being 47.24%, on average. Earnings and revenues are expected to grow 41.0% and 36.3%, respectively, from the year-ago quarter. Additionally, the stock falls under a top-ranked Zacks industry (top 38%). The Internet behemoth has surged about 4% in the past three months.
Apple
Apple has a Zacks Rank #2 and an Earnings ESP of +5.69%. The stock saw no earnings estimate revision over the past 30 days for fourth-quarter fiscal 2021 and its earnings surprise history is strong. It delivered an earnings surprise of 23.74%, on average, over the past four quarters. Apple is expected to report substantial earnings growth of 68.5% from the year-ago quarter. Revenues are expected to increase 32.1% year over year. It belongs to a top-ranked Zacks industry (top 5%). The stock is up 1.3% in the past three-month timeframe (read: Apple Unveils iPhone 13 Models: ETFs to Buy).
Amazon
Amazon has a Zacks Rank #4 and an Earnings ESP of 0.00%. The stock saw no earnings estimate revision over the past 30 days for the third quarter. The Zacks Consensus Estimate represents substantial year-over-year earnings decline of 29.5% and revenue growth of 16.3%. Amazon’s earnings surprise history is impressive, with an average beat of 63.75% for the last four quarters. However, the stock falls under a bottom-ranked Zacks industry (bottom 31%). The online e-commerce behemoth has witnessed a share price decrease of 8.4% in the past three months.
ETFs to Tap
Given this, investors may want to play these stocks with the help of ETFs. Below we have highlighted six ETFs having the largest exposure to these tech giants.
MicroSectors FANG+ ETN (FNGS - Free Report) : This ETN is linked to the performance of the NYSE FANG+ Index, which is equal-dollar weighted and designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. The note accounts for a 10% share in each of the FAANG stocks and has a Zacks ETF Rank #3.
iShares Evolved U.S. Technology ETF (IETC - Free Report) : This fund employs data science techniques to identify companies with exposure to the technology sector. The five firms account for a combined 42.6% share in the basket (see: all the Technology ETFs here).
Vanguard Mega Cap Growth ETF (MGK - Free Report) : This ETF offers exposure to the largest growth stocks in the U.S. market and has a Zacks ETF Rank #2. The five firms account for a combined 41.2% share in the basket.
Blue Chip Growth ETF (TCHP - Free Report) : This fund focuses on companies with leading market positions, seasoned management and strong financial fundamentals. It accounts for a combined 41.9% in the five firms.
Invesco QQQ (QQQ - Free Report) : This ETF focuses on 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. This fund makes up for 36.4% share in the in-focus firms and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Best Leveraged ETF Areas of Past Decade).
iShares Expanded Tech Sector ETF (IGM - Free Report) : This product offers broad exposure to the technology sector, and technology-related companies in the communication services and consumer discretionary sectors. It makes up for about 34.8% in the five big tech names and has a Zacks ETF Rank #1 with a Medium risk outlook.
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ETFs in Focus as Big Tech Q3 Earnings Start to Unfold
We are in the peak earnings season and the tech giants are in the spotlight this week. The five biggest technology stocks have witnessed mixed performances over the past three months with Alphabet (GOOGL - Free Report) and Microsoft (MSFT - Free Report) riding high, while Amazon (AMZN - Free Report) and Facebook are struggling to gain traction. Apple (AAPL - Free Report) has performed on par with the technology sector (read: 5 Tech ETFs Outperforming the Market This Year).
These five companies currently account for about 23% of the total market capitalization of the S&P 500 Index. Total Q3 earnings from the group of five companies are expected to be up 24.3% on revenue growth of 25.1%. This reflects a deceleration from the Q2 earnings growth of 88% and revenue growth of 35.4%
Facebook came up with the mixed results, wherein it beat earnings estimates but lagged on revenues. after the market bell on Oct 25. Microsoft and Alphabet are scheduled to release their earnings on Oct 26 after market close while Apple and Amazon will report on Oct 28.
Microsoft
Microsoft has a Zacks Rank #2 (Buy) and an Earnings ESP of 0.00%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The stock witnessed no earnings estimate revision for the to-be-reported quarter over the past 30 days. The Zacks Consensus Estimate indicates substantial earnings growth of 13.19% and revenue growth of 18.09% from the year-ago quarter. Microsoft’s earnings track is impressive, with the last four-quarter earnings surprise being 16.94%, on average. The stock belongs to a top-ranked Zacks industry (top 39%) and has gained 7.5% over the past three months.
Alphabet
Alphabet has a Zacks Rank #2 and an Earnings ESP of +7.71%. It saw positive earnings estimate revision of a penny cents over the past 30 days for the to-be-reported quarter. Analysts raising estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The company’s earnings surprise track over the past four quarters is good with the beat being 47.24%, on average. Earnings and revenues are expected to grow 41.0% and 36.3%, respectively, from the year-ago quarter. Additionally, the stock falls under a top-ranked Zacks industry (top 38%). The Internet behemoth has surged about 4% in the past three months.
Apple
Apple has a Zacks Rank #2 and an Earnings ESP of +5.69%. The stock saw no earnings estimate revision over the past 30 days for fourth-quarter fiscal 2021 and its earnings surprise history is strong. It delivered an earnings surprise of 23.74%, on average, over the past four quarters. Apple is expected to report substantial earnings growth of 68.5% from the year-ago quarter. Revenues are expected to increase 32.1% year over year. It belongs to a top-ranked Zacks industry (top 5%). The stock is up 1.3% in the past three-month timeframe (read: Apple Unveils iPhone 13 Models: ETFs to Buy).
Amazon
Amazon has a Zacks Rank #4 and an Earnings ESP of 0.00%. The stock saw no earnings estimate revision over the past 30 days for the third quarter. The Zacks Consensus Estimate represents substantial year-over-year earnings decline of 29.5% and revenue growth of 16.3%. Amazon’s earnings surprise history is impressive, with an average beat of 63.75% for the last four quarters. However, the stock falls under a bottom-ranked Zacks industry (bottom 31%). The online e-commerce behemoth has witnessed a share price decrease of 8.4% in the past three months.
ETFs to Tap
Given this, investors may want to play these stocks with the help of ETFs. Below we have highlighted six ETFs having the largest exposure to these tech giants.
MicroSectors FANG+ ETN (FNGS - Free Report) : This ETN is linked to the performance of the NYSE FANG+ Index, which is equal-dollar weighted and designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. The note accounts for a 10% share in each of the FAANG stocks and has a Zacks ETF Rank #3.
iShares Evolved U.S. Technology ETF (IETC - Free Report) : This fund employs data science techniques to identify companies with exposure to the technology sector. The five firms account for a combined 42.6% share in the basket (see: all the Technology ETFs here).
Vanguard Mega Cap Growth ETF (MGK - Free Report) : This ETF offers exposure to the largest growth stocks in the U.S. market and has a Zacks ETF Rank #2. The five firms account for a combined 41.2% share in the basket.
Blue Chip Growth ETF (TCHP - Free Report) : This fund focuses on companies with leading market positions, seasoned management and strong financial fundamentals. It accounts for a combined 41.9% in the five firms.
Invesco QQQ (QQQ - Free Report) : This ETF focuses on 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. This fund makes up for 36.4% share in the in-focus firms and has a Zacks ETF Rank #2 with a Medium risk outlook (read: Best Leveraged ETF Areas of Past Decade).
iShares Expanded Tech Sector ETF (IGM - Free Report) : This product offers broad exposure to the technology sector, and technology-related companies in the communication services and consumer discretionary sectors. It makes up for about 34.8% in the five big tech names and has a Zacks ETF Rank #1 with a Medium risk outlook.