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We are in the peak earnings season and tech giants are in the spotlight this week, with the five biggest giants set to report. Investors should note that technology has been the hardest hit sector since the start of 2022, thanks to soaring yields and a hawkish Fed.
This is because the tech sector relies on easy borrowing for superior growth and its value depends heavily on future earnings. A rise in long-term yields lowers the present value of companies’ future earnings, sparking fears of overvaluation. The five biggest technology stocks — Apple (AAPL - Free Report) , Amazon (AMZN - Free Report) , Meta Platforms , Alphabet (GOOGL - Free Report) and Microsoft (MSFT - Free Report) — have plunged an average of 15.6% over the past three months compared to a loss of 3.2% for the S&P 500 (read: Grab These Top-Ranked Tech ETFs to Join the Rebound Rally).
These five companies currently account for about 23% of the total market capitalization of the S&P 500 Index. Both Microsoft and Alphabet are scheduled to release their earnings on Apr 26, while Meta Platforms and Apple will report on Apr 27 and Apr 28, respectively. Amazon is also slated to report on Apr 28.
Microsoft
Microsoft has a Zacks Rank #4 (Sell) 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 (Buy) 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 11.8% and revenue growth of 17.4% from the year-ago quarter. Microsoft’s earnings track is impressive, with the last four-quarter earnings surprise being 10.88%, on average. The stock belongs to a bottom-ranked Zacks industry (bottom 37%) and has lost about 7.6% over the past three months (see: all the Technology ETFs here).
Alphabet
Alphabet has a Zacks Rank #3 and an Earnings ESP of -1.94%. It saw positive earnings estimate revision of 14 cents over the past seven days for the to-be-reported quarter. Analysts increasing 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 35.23%, on average. Earnings are expected to decline 2.5% while revenues are expected to grow 22.7% from the year-ago quarter. Alphabet falls under a bottom-ranked Zacks industry (bottom 46%). The Internet behemoth has shed about 8.6% in the past three months.
Apple
Apple has a Zacks Rank #3 and an Earnings ESP of -0.77%. The stock saw no earnings estimate revision over the past 30 days for second-quarter fiscal 2022 and its earnings surprise history is strong. It delivered an earnings surprise of 20.28%, on average, over the past four quarters. Apple is expected to report substantial earnings growth of 2.1% from the year-ago quarter. Revenues are expected to increase 5.8% year over year. It belongs to a bottom-ranked Zacks industry (bottom 26%). The stock is up 0.1% in the past three-month timeframe.
Meta Platforms
Meta Platforms has a Zacks Rank #3 and an Earnings ESP of +2.03%. The social media giant saw negative earnings estimate revision of 7 cents for the to-be-reported quarter over the past 30 days. The current Zacks Consensus Estimate for the yet-to-be reported quarter indicates substantial year-over-year earnings decline of 23%. Revenues are expected to increase 8.1%. Meta Platforms delivered an earnings surprise of 14.2%, on average, in the last four quarters. The stock belongs to a bottom-ranked Zacks industry (bottom 34%). Shares of FB have lost more than 40% in the past three months.
Amazon
Amazon has a Zacks Rank #3 and an Earnings ESP of +37.95%. The stock saw a positive earnings estimate revision of 32 cents over the past 7 days for the first quarter. The Zacks Consensus Estimate represents a substantial year-over-year earnings decline of 41.6% and revenue growth of 7.8%. Amazon’s earnings surprise history is impressive, with an average beat of 167.33% for the last four quarters. However, the stock falls under a bottom-ranked Zacks industry (bottom 11%). The online e-commerce behemoth has witnessed a share price decrease of 0.1% 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 (read: Another Banner Quarter for Tesla: ETFs to Buy).
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 47.6% in the five firms.
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 43.6% share in the basket.
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 41.8% share in the basket.
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 36.7% share in the in-focus firms and has a Zacks ETF Rank #2 with a Medium risk outlook.
iShares Expanded Tech Sector ETF (IGM): 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 34.2% in the five big tech names and has a Zacks ETF Rank #1 with a Medium risk outlook.
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What Lies Ahead for Big Tech ETFs in Q1 Earnings?
We are in the peak earnings season and tech giants are in the spotlight this week, with the five biggest giants set to report. Investors should note that technology has been the hardest hit sector since the start of 2022, thanks to soaring yields and a hawkish Fed.
This is because the tech sector relies on easy borrowing for superior growth and its value depends heavily on future earnings. A rise in long-term yields lowers the present value of companies’ future earnings, sparking fears of overvaluation. The five biggest technology stocks — Apple (AAPL - Free Report) , Amazon (AMZN - Free Report) , Meta Platforms , Alphabet (GOOGL - Free Report) and Microsoft (MSFT - Free Report) — have plunged an average of 15.6% over the past three months compared to a loss of 3.2% for the S&P 500 (read: Grab These Top-Ranked Tech ETFs to Join the Rebound Rally).
These five companies currently account for about 23% of the total market capitalization of the S&P 500 Index. Both Microsoft and Alphabet are scheduled to release their earnings on Apr 26, while Meta Platforms and Apple will report on Apr 27 and Apr 28, respectively. Amazon is also slated to report on Apr 28.
Microsoft
Microsoft has a Zacks Rank #4 (Sell) 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 (Buy) 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 11.8% and revenue growth of 17.4% from the year-ago quarter. Microsoft’s earnings track is impressive, with the last four-quarter earnings surprise being 10.88%, on average. The stock belongs to a bottom-ranked Zacks industry (bottom 37%) and has lost about 7.6% over the past three months (see: all the Technology ETFs here).
Alphabet
Alphabet has a Zacks Rank #3 and an Earnings ESP of -1.94%. It saw positive earnings estimate revision of 14 cents over the past seven days for the to-be-reported quarter. Analysts increasing 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 35.23%, on average. Earnings are expected to decline 2.5% while revenues are expected to grow 22.7% from the year-ago quarter. Alphabet falls under a bottom-ranked Zacks industry (bottom 46%). The Internet behemoth has shed about 8.6% in the past three months.
Apple
Apple has a Zacks Rank #3 and an Earnings ESP of -0.77%. The stock saw no earnings estimate revision over the past 30 days for second-quarter fiscal 2022 and its earnings surprise history is strong. It delivered an earnings surprise of 20.28%, on average, over the past four quarters. Apple is expected to report substantial earnings growth of 2.1% from the year-ago quarter. Revenues are expected to increase 5.8% year over year. It belongs to a bottom-ranked Zacks industry (bottom 26%). The stock is up 0.1% in the past three-month timeframe.
Meta Platforms
Meta Platforms has a Zacks Rank #3 and an Earnings ESP of +2.03%. The social media giant saw negative earnings estimate revision of 7 cents for the to-be-reported quarter over the past 30 days. The current Zacks Consensus Estimate for the yet-to-be reported quarter indicates substantial year-over-year earnings decline of 23%. Revenues are expected to increase 8.1%. Meta Platforms delivered an earnings surprise of 14.2%, on average, in the last four quarters. The stock belongs to a bottom-ranked Zacks industry (bottom 34%). Shares of FB have lost more than 40% in the past three months.
Amazon
Amazon has a Zacks Rank #3 and an Earnings ESP of +37.95%. The stock saw a positive earnings estimate revision of 32 cents over the past 7 days for the first quarter. The Zacks Consensus Estimate represents a substantial year-over-year earnings decline of 41.6% and revenue growth of 7.8%. Amazon’s earnings surprise history is impressive, with an average beat of 167.33% for the last four quarters. However, the stock falls under a bottom-ranked Zacks industry (bottom 11%). The online e-commerce behemoth has witnessed a share price decrease of 0.1% 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 (read: Another Banner Quarter for Tesla: ETFs to Buy).
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 47.6% in the five firms.
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 43.6% share in the basket.
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 41.8% share in the basket.
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 36.7% share in the in-focus firms and has a Zacks ETF Rank #2 with a Medium risk outlook.
iShares Expanded Tech Sector ETF (IGM): 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 34.2% in the five big tech names and has a Zacks ETF Rank #1 with a Medium risk outlook.