ETFs
4 reasons to bet on Apple ETFs
Apple Inc. AAPL has been an underperformer this year with flat performance, below other large-cap technology companies. Investors should note that Roundhill Magnificent Seven ETF MAGS has jumped 23.6% this year while Apple is up 0.9%.
Apple’s lesser exposure to AI within the Magnificent Seven group and concerns over iPhone sales growth in the key Chinese market are blamed for the lackluster performance.
The difficulty of Apple’s sales in China
Apple, in fact, faced a huge setback in the Chinese smartphone market during the first quarter of the year, experiencing a 19% drop in shipments, its worst performance since 2020, according to Reuters. This decline is due to the direct impact of Huawei’s new product launches in the premium segment.
Apple’s share of China’s smartphone market fell to 15.7% from 19.7% a year earlier, putting it almost neck and neck with Huawei, which saw a remarkable 70% increase in its sales. As a result, Apple lost its position as China’s top smartphone seller and slipped to third place.
Should we look beyond this weakness and dig deeper into other areas of strength?
Apple focuses on AI
Apple recently unveiled its latest iPad Pros featuring the all-new M4 processor, which promises improved performance in various aspects including AI capabilities. Apple directly challenged competitors like Intel, AMD and Qualcomm by claiming that the M4’s neural engine outperforms any other neural processing unit in AI PCs. The move indicates Apple’s ambition to become a leader in AI technology, particularly in the area of consumer devices.
Apple’s massive investment in AI and CEO Tim Cook’s increasing mentions of it indicate a strategic focus on the technology’s development. This includes acquiring smaller AI companies and exploring partnerships with industry leaders like OpenAI and Google.
Integration with AI to boost iPhone sales?
Analysts predict that Apple’s progress in generative AI will boost iPhone sales by introducing exciting new features. As consumers keep their devices for longer periods of time, innovative AI experiences could be a significant differentiator between iPhone generations. Additionally, Apple’s overall quarterly revenue fell in the second quarter, but less than analysts expected, and Tim Cook expects revenue growth to resume in the current quarter.
Improving sales trend in a struggling sector in China
In the most recent quarter, sales in Greater China, Apple’s third region, fell 8 percent to $16.37 billion. This figure exceeds the $15.25 billion expected by FactSet analysts. This performance could ease investors’ concerns about Apple losing market share to local competitors.
The story continues
Apple’s dividends rise
Apple increased its cash dividend by 4% and authorized an additional stock repurchase program worth $110 billion. This acquisition is the largest in Apple’s history. In 2018, the tech giant authorized $100 billion in stock buybacks.
Should you buy Apple via the ETF route?
AAPL stock gained 8.2% last month and erased the losses recorded at the start of the year. Over the past week, the stock has climbed 2.2%. The stock has an optimistic Momentum Score of ‘B’, but the stock lacks value.
Investors who intend to ride the bullish momentum but are still wary of slowing Apple sales could go the ETF route. That’s because ETFs help investors smooth out a company’s average performance with the stellar presence of other big tech companies.
Below, we highlight a few ETFs with heavy exposure to Apple for investors looking to make a bet on the stock with much lower risk.
Select Sector SPDR Technology ETF XLK – AAPL ranks second with 19.10% of the weight. The fund has a Zacks Rank #1 (Strong Buy).
Vanguard Information Technology ETF VGT – AAPL occupies second place with 16.39% of the weight. The fund has a Zacks Rank #1.
iShares Dow Jones US Technology ETF IYW – AAPL occupies the second place with 15.21% of the weight. The fund has a Zacks Rank #1.
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Apple Inc. (AAPL): Free Stock Analysis Report
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
iShares US Technology ETF (IYW): ETF Research Reports
Vanguard Information Technology ETF (VGT): ETF Research Reports
Roundhill Magnificent Seven ETF (MAGS): ETF Research Reports