ETFs
Should you buy Apple ETFs following the rebound in iPhone sales in China? – June 4, 2024
Over the past year, while some members of the “Magnificent 7” have reported strong quarterly results and solid price gains, Apple’s performance has been less stellar. Despite the broader market rising 23%, Apple shares were only up 6.3%. This moderate performance is attributed to uncertainties surrounding sales in China and Apple’s lesser exposure to AI compared to other “Mag 7” candidates.
Recent positive developments
However, Apple’s performance has increased recently. Over the past month, the company’s shares have gained nearly 11% (compared to the more than 4% gains seen in the S&P 500), buoyed by positive reactions to its earnings report. Bloomberg reported a 52% increase in iPhone shipments in China last month, further boosting Apple stock’s performance.
Apple’s latest quarterly results
In its latest quarterly release, Apple beat expectations, posting a 1.3% beat over the Zacks Consensus EPS estimate and sales 1% above expectations. This marks the fifth consecutive double-beat for the tech giant.
Despite the challenges in China, Apple’s sales in the region have been much closer to expectations compared to previous periods. While there is still a $220 million shortfall from the consensus estimate, this is a significant improvement over the prior period’s $2.5 billion shortfall.
Positive strategic moves
Apple’s recent announcements reflect efforts to maximize shareholder wealth. The company announced the largest buyout in its history, totaling $110 billion. Additionally, Apple announced a 4% increase in its quarterly payout, marking the 12th consecutive year of higher payouts.
Apple’s growing focus on AI
Apple intends to enter generative AI (Gen AI) in 2024 through inorganic expansion. The company reportedly acquired Canadian AI startup DarwinAI earlier this year. Apple is preparing to transform Siri with advanced AI. The move will incorporate several features, including voice memo transcriptions and summaries, quick website and notification summaries, automated message replies, advanced photo editing and AI-generated emojis, according to Bloomberg, cited on straitstimes.
Target price
Based on short-term price targets offered by 30 analysts, the average price target for Apple stands at $205.96. Forecasts range from a low of $164.00 to a high of $275.00. The average price target represents an increase of 7.13% from the last closing price of $192.25 on May 31, 2024. Apple’s price-to-earnings (TTM) ratio is 29.90X versus a P/E of 46.02X owned by the underlying industry.
Focus on ETFs
Investors who intend to follow Apple’s latest improvements but are still wary of its seemingly slow-moving AI initiatives could take 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 – Free report) – AAPL occupies second place with 19.10% of the weight. The fund has a Zacks Rank #1 (Strong Buy).
Vanguard Information Technology ETF (VGT – Free report) – AAPL occupies second place with 16.39% of the weight. The fund has a Zacks Rank #1.
iShares Dow Jones US Technology ETF (IYW – Free report) – AAPL takes second place with 15.21% of the weight. The fund has a Zacks Rank #1.
Want key ETF news sent straight to your inbox?
The free Zacks Funds Newsletter will bring you top news, analysis, and top-performing ETFs every week.