Should You Buy Apple ETFs This Earnings Season?

Technology giant Apple (NASDAQ:AAPL) is set to release third-quarter fiscal 2018 results on Jul 31 after market close. Since Apple accounts for over 19% of the total market capitalization of the entire technology sector in the S&P 500 index and is heading toward becoming the first trillion dollar company, it is worth taking a look at its fundamentals ahead of results.

Apple has been on an uptrend over the past three months, returning about 12.9% compared with the industry’s gain of 12.7%. The positive momentum is expected to continue given that the stock has some attractive fundamentals though earnings beat could not be predicted at this time.

Inside Our Methodology

Apple has a Zacks Rank #2 (Buy) and an Earnings ESP of -1.52%. According to our surprise prediction methodology, a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) when combined with a positive Earnings ESP raises the possibility of a beat. A Zacks Rank #4 or 5 (Strong Sell) stock is best avoided going into the earnings announcement, especially when the company is seeing negative estimate revisions. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The stock saw no earnings estimate revision over the past 30 days but its earnings surprise history is strong. It has delivered an average positive earnings surprise of 5.10% over the past four quarters. Apple is expected to post substantial earnings growth of 29.94% and revenue growth of 15.33% in the fiscal third quarter. Though AAPL boasts a solid Value Score of B, its Growth and Momentum Score of C and D, respectively, look disappointing. The stock belongs to a top-ranked Zacks Industry (top 7%).

According to the analysts polled by Zacks, Apple has an average target price of $199.39 with less than half of the analysts having a Strong Buy or a Buy rating ahead of its earnings. This indicates nearly 5% upside to the current price of AAPL.

What to Watch?

Investors will continue to focus on iPhone sales, which have slowed in recent quarters. The third quarter is seasonally slow for iPhones as consumers wait for a new product launch, expected later this year.

ETFs in Focus

Given this, ETFs having the highest allocation to this tech titan will be in focus going into its earnings announcement. While there are several ETFs in the space with Apple in their top 10 holdings, we have highlighted five technology funds that have Apple as their top firm:

iShares Dow Jones US Technology ETF (NYSEARCA:IYW) – The fund has been up 9.6% in the past three months and carries a Zacks ETF Rank #2 with a Medium risk outlook. Apple makes up for 16.5% of the assets.

Vanguard Information Technology ETF (NYSEARCA:VGT) – It has gained about 10.4% and sports a Zacks ETF Rank #1 with a Medium risk outlook. Here, AAPL takes 15.5% share.

Select Sector SPDR Technology ETF (NYSEARCA:XLK) – The fund has added 9.4% in the same time frame and has a Zacks ETF Rank #2 with a Medium risk outlook. Apple accounts for 14.1% share.

MSCI Information Technology Index ETF (NYSEARCA:FTEC) – This fund has a Zacks ETF Rank #1 with a Medium risk outlook and is up 10.2% over the past three months. Apple has 13.5% allocation.

iShares Global Technology Sector ETF (NYSEARCA:IXN) – The product is up 7.2% in three months. Apple accounts for 11.9% allocation.

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