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Microsoft Revises Sales Guidance on Coronavirus: ETFs in Focus

Sanghamitra Saha

After Apple AAPL, it is Microsoft MSFT which has announced that it won't meet its sales forecast for the March quarter due to the impacts of coronavirus. The "uncertainty related to the public health situation in China” has weighed on Microsoft's Windows and Surface hardware businesses. Though Microsoft shares were up 1.3% in the key trading session on Feb 26, shares lost about 2% after hours (read: Coronavirus to Hurt Apple Earnings: Time to Buy These ETFs?).

During its earnings call, Microsoft issued quarterly revenue guidance for the personal computing segment between $10.75 billion and $11.15 billion. The company also highlighted that its previous guidance “included a wider than usual range to reflect uncertainty related to the public health situation in China.”

What's Ahead for Microsoft-Heavy ETFs?

Against this backdrop, ETFs heavy on this tech behemoth may face tensions in the near term. However, the long-term fundamental is pretty strong for the tech giant. It is an immensely cash-rich company and is poised to benefit from the cloud business greatly.

Microsoft is also catching up with the industry leader Amazon AMZN. Microsoft’s cloud market share went up from 14.2% in 2018 to 16.9% in 2019 while AWS’ 2019 share was 32.7% versus 32.3% in 2018.

So, investors with a strong stomach for risks may consider the latest selloff in Microsoft as a buying point. We have highlighted below a few ETFs with double-digit exposure to Microsoft (read: Forget Virus Scare, Buy Tech ETFs on the Dip).

Select Sector SPDR Technology ETF XLK

This most-popular technology ETF follows the Technology Select Sector Index. The fund charges 13 bps in fees per year from investors. It holds about 71 securities in its basket, with Microsoft occupying the second position at 19.2%. XLK has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

iShares U.S. Technology ETF IYW

This ETF tracks the Dow Jones U.S. Technology Capped Index, giving investors exposure to 156 technology stocks. Of these, Microsoft occupies the second position in the basket with 17.2% of the assets. The fund charges 42 bps in fees and expenses. The fund has a Zacks ETF Rank #1 with a Medium risk outlook.

Vanguard Information Technology ETF VGT

This fund provides exposure to about 325 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here MSFT occupies the second position with about 16% share. The ETF has 0.10% in expense ratio. It has a Zacks ETF Rank #1 with a Medium risk outlook.

MSCI Information Technology Index ETF FTEC

This fund is home to about 322 technology stocks. It follows the MSCI USA IMI Information Technology Index. Microsoft is the second firm with about 15.8% allocation. The ETF has 0.08% in expense ratio. It carries a Zacks ETF Rank #1 with a Medium risk outlook.

iShares Evolved U.S. Technology ETF IETC

This is an active ETF. It employs data science techniques to provide exposure to about 236 technology stocks. Microsoft is the top firm with 15.6% allocation. IETC charges 18 bps in annual fees.

iShares Global Tech ETF IXN

This product provides broad exposure to technology stocks from around the world by tracking the S&P Global 1200 Information Technology Sector Index. Holding 118 stocks in its basket, Microsoft occupies the second spot with about 15.3% share. American firms dominate the fund’s portfolio at 80%. Expense ratio comes in at 0.46%.

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Click to get this free report Microsoft Corporation (MSFT) : Free Stock Analysis Report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Apple Inc. (AAPL) : Free Stock Analysis Report Technology Select Sector SPDR ETF (XLK): ETF Research Reports Fidelity MSCI Information Technology Index ETF (FTEC): ETF Research Reports iShares Global Tech ETF (IXN): ETF Research Reports Vanguard Information Technology ETF (VGT): ETF Research Reports iShares U.S. Technology ETF (IYW): ETF Research Reports iShares Evolved U.S. Technology ETF (IETC): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report