After a stellar performance out of Intel to kick off earnings season last week, several other bellwethers have reported impressive results, leading some investors to believe that the market recovery is the real deal (see all the early winners and losers from the start of earnings season). Looking to add to recent recent gains will be technology ETFs, which are watching a slew of crucial earnings reports this week. Yesterday, all eyes were on Apple (AAPL) and Yahoo! (YHOO) after the bell as two of the most eagerly anticipated reports came out after the markets closed. These reports are likely to impact this morning's trading, and will likely help to set the tone for technology ETFs as the second quarter ramps up.
Yahoo! was projected to show an improved first quarter by posting a profit of 9 cents a share on $1.7 billion in revenues. However, the company crushed estimates for net income by posting earnings of 22 cents a share on the back of $1.6 billion in revenues. Although the net income figures were nearly triple that of 2009, the lack of revenue growth sent shares tumbling close to 1% in early after hours trading. Last year, Yahoo! reported earnings of 8 cents a share on revenues of $1.58 billion.
Apple was projected to show double-digit gains in both revenue and earnings on the back of strong sales from the iPhone and Mac products. Net income was projected to rise to $2.25 billion with earnings per share coming in at $2.45. Apple reported revenues of $13.5 billion and earnings of $3.33 a share. This came after a growth spurt in the iPhone segment, which saw growth of 131% on 8.8 million units sold. In this quarter last year, Apple earned $1.33 a share on revenues of roughly $9.5 billion. After the report, trading on Apple shares was halted until 3:50 CDT, at which point the shares initially soared higher by more than 6%.
Three ETFs to Watch:
While there are a multitude of technology ETFs (see all the ETFs in the Technology Equities ETFdb Category), the following three stand out as potential big movers after the reports from Yahoo! and Apple:
PowerShares QQQ (QQQQ): This ETF, which tracks the Nasdaq-100 Index, will be heavily impacted by Apple’s earnings. QQQQ allocates 15.5% of its assets to AAPL; Yahoo! is not one of the top 30 holdings.
Internet HOLDR (HHH): HHH invests in companies that have significant operations based on or developed for the internet. Some of its top holdings include Amazon.com and Ebay, in addition to Yahoo! (which makes up 15% of the fund). However, Apple is not in the fund’s holdings suggesting that Apple’s earnings report will have only a collateral effect on the performance of HHH.
SPDR MS Technology Fund (MTK): MTK tracks the Morgan Stanley Technology Index, which focuses on electronics-based tech companies. The fund is extremely diversified compared to the other technology ETFs available on the market today despite holding just 37 different equities; its top holding makes up just 3.1% of the fund. While MTK doesn’t allocate a significant portion of its assets to either Apple or Yahoo!, it does have both in its top 10 holdings with Apple comprising 3% of the total assets and Yahoo! comprising 2.9%.
Disclosure: No positions at time of writing.