ETFs Locked And Loaded For Apple Earnings

Apple Inc. AAPL, the largest U.S. company by market value, steps into the earnings confessional Thursday after the close of U.S. markets. The iPhone maker is expected to post per share earnings of $1.89 for its most recently completed quarter, but Apple has a penchant for beating Wall Street forecasts.

More than 120 exchange-traded funds feature exposure to Apple, some with weights well into the double digits. “Apple ETFs” are again receiving increased attention from investors ahead of Thursday's earnings and following reports of robust demand for the new iPhone X, reports of which sent shares of Apple to a record high Monday.

As Benzinga reported Monday: “We are thrilled to be taking orders for iPhone X, the future of the smartphone,” said an Apple spokesperson. “We can see from the initial response, customer demand is off the charts. We’re working hard to get this revolutionary new product into the hands of every customer who wants one, as quickly as possible. We will keep accepting orders online, and iPhone X will be available at Apple retail stores on Friday, November 3 starting at 8 a.m., as well as from our carrier and retailer partners around the world.”

The Usual Suspects

The PowerShares QQQ QQQ, the Nadaq-100 tracking ETF, is one of the Apple ETFs poised for an eventful week. QQQ allocates nearly 12 percent of its weight to Apple, an Apple allocation exceeded by only a handful of ETFs.

QQQ has other near-term catalysts besides Apple. On Wednesday, Facebook Inc FB reports earnings. Wall Street is expecting Facebook to earn $1.41 per share on revenue of $9.842 billion. Facebook is QQQ's fourth-largest holding and accounts for nearly 6 percent of the ETF. Given its exposure to Apple and Facebook, it may not be surprising that QQQ has seen October inflows of almost $1.2 billion.

"Based on intra-quarter data points, channel checks, and our model sensitivity work, we view current Street September quarter estimates as reasonable, with upwards variance modestly more likely than downwards variance," Mark Mahaney of RBC Capital Markets said in a note regarding Facebook.

Another Idea

Since many of the largest, most heavily traded technology sector ETFs are cap-weighted funds, these products have significant weights to stocks such as Apple and Facebook. The Vanguard Technology ETF VGT is one of several technology sector ETFs to consider ahead of Apple and Facebook earnings.

At the end of the third quarter, Apple and Facebook combined for 20.7 percent of VGT's weight. Investors are acknowledging VGT's status as an Apple ETF as highlighted by October inflows of almost $327 million.

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