More Run for Tech ETFs After Sizzling FAAG Earnings?

Jul 30 was marked with big tech earnings releases. After market close, tech behemoths Facebook (FB), Amazon (AMZN), Apple (AAPL) and Alphabet (GOOG, GOOGL), each reported quarterly results that topped estimates, reaffirming the sustainability (or rather the winning spree) of tech stocks amid the pandemic.

How Stellar Were Tech Earnings in Q2?

Facebook’s revenues 11% over last year as its advertising business remained strong. Alphabet’s ad businesswas however struggling, with Google ad revenues sliding 8% year over year. ButAlphabet’s overall top  and bottom line still surpassed estimates.Facebook’s daily active users jumped 13% and monthly active users rose 12%.

Facebook’s revenues of $18.69 billion and EPS of $1.80 topped respective the estimates of $17.29 billion and $1.44. Alphabet’s revenues of $31.6 billion and EPS of $10.13 also beat estimates of $30.58 billion and $8.43, respectively.

Amazon’s net income doubled year over year to $5.2 billion and net sales jumped 40% during the quarter, as pandemic boosted the demand for online shopping. Amazon’s earnings per share of $10.30 beat estimates of $1.74 while revenues of $88.91 billion surpassed estimates by $7.35 billion.

Apple’s revenues of $59.7 billion in the second quarter surpassed estimates by $7.75 billion, on strong hardware product and services revenues. Earnings per share of $2.58 beat estimates by 55 cents.

Tech Sector a Winner This Year, Will Sizzle Ahead Too

Technology has been a winning sector amid the coronavirus outbreak as social distancing norms enacted globally to mitigate the spread of the virus compelled people to stay at home, online shopping binge and work as well as learn from home. Technology Select Sector SPDR Fund (XLK) was up 17.9% in the past three months versus 11.9% gains in the S&P 500.

Though many corners of the global economy have reopened, the trend for work-and-learn-from home should stay strong. This is especially true given that the second wave of contagion has been rife. Although some slowdown in online activities may be expected thanks to the maturation of the winning trend (Facebook said that users metrics are likely be flat to down slightly in most regions during the current quarter), the allure for tech stocks will in fact continue.

Tech companies are cash-rich. And cash seems to be the most important asset to individual and corporations right now.  Hoarding cash could be a great strategy for the near term as inflation risks may be a distant possibility.

If this was not enough, big tech companies are now eyeing the virus testing market. Verily Life Sciences, a sister company of Google, hurried to introduce a free coronavirus-screening site for the public and set up testing locations in March.

Microsoft and the large insurer UnitedHealth Group (UNH) joined forces on a free symptom-checking app. Fitbit launched a program that includes a daily symptom-checking app for employees and a work force health-monitoring dashboard for employers (read: Big Techs Making the Most of Medical Emergency: ETFs to Win).

ETFs in Focus

Against this backdrop, we highlight below a few technology ETFs that revolver around big tech stocks.

Apple-Heavy ETFs – Technology Select Sector SPDR ETF XLK; Vanguard Information Technology ETF VGT

Alphabet-Heavy ETFs – Communication Services Select Sector SPDR Fund XLC;Vanguard Communication Services ETF VOX

Facebook-Heavy ETFs – XLC, VOX

Amazon-Heavy ETFs – Fidelity MSCI Consumer Discretionary Index ETF FDIS, Consumer Discretionary Select Sector SPDR Fund XLY)

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Technology Select Sector SPDR ETF (XLK): ETF Research Reports
 
Vanguard Communication Services ETF (VOX): ETF Research Reports
 
Vanguard Information Technology ETF (VGT): ETF Research Reports
 
Fidelity MSCI Consumer Discretionary Index ETF (FDIS): ETF Research Reports
 
Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports
 
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