Nasdaq-100 Shakeup: 3 Stocks that Can Gain
Investors like to see capital-allocation hierarchies, and Nasdaq-100 (NDX) is one of them. Year-to-date, this index grew by 32%, capturing the performance of the 100 largest non-financial firms. Nearly 60% of Nasdaq 100 companies are from the IT sector, dominated by Apple at 8.85% weight, closely followed by Microsoft, Nvidia, Broadcom, Amazon, Meta Platforms, and Tesla at borderline 5% weight.
Consumer discretionary companies comprise 21% of NDX, with Costco being the largest player at 2.66% of the total index weight. Telecommunications, healthcare, and industrial companies hold 4 – 5% weight each. Altogether, firms across non-financial NDX sectors have a market cap of $29.18 trillion.
For comparison, China’s GDP in 2023 was $17.79 trillion. In other words, NDX growth reflects US tech dominance and the dominance of the IT sector in the digital age, now heavily boosted by AI investments and expectations.
Given the prestigious nature of NDX, which companies are about to join the Nasdaq-100 listing? And which ones will leave it?
New Nasdaq-100 Entries
In the annual reconstitution of Nasdaq-100 announced last Friday, Palantir (PLTR), MicroStrategy (MSTR), and Axon Enterprise (AXON) will join the list. This shouldn’t surprise Tokenist readers as we covered the growth of all three companies extensively.
MicroStrategy (NASDAQ: MSTR)
Michael Saylor’s MicroStrategy is particularly notable as the primary proxy to Bitcoin exposure in leveraged stock form. As previously explained in-depth, Saylor is counting on the certainty that central banking will continue to erode USD, making Bitcoin the exit strategy. But since Bitcoin price is volatile, this also translates to MSTR shares.
Owing to Bitcoin volatility, MicroStrategy attracts investors with convertible bonds. They carry a premium for the option to convert into MSTR shares. In turn, MicroStrategy can gobble up these premiums to accelerate BTC accumulation. Such buying pressure tends to drive up Bitcoin’s price, which, in turn, boosts MSTR shares.
Thanks to this clever dynamic, that so far only Saylor fully exploits, MSTR stock is up 517% year-to-date vs Bitcoin itself at only 136%. It bears noting that, after the 4th halving, BTC inflation rate is now 0.84%. Furthermore, over 94% of Bitcoin’s total 21M supply is already available.
With a crypto-friendly Trump admin ahead, this combination of scarcity, currency devaluation hedge, and lack of major FUD narratives is likely to boost MicroStrategy’s valuation, now holding a $101.8 billion market cap.
The average MSTR price target is $549.56 vs the press time price of $429.51, per WSJ forecast data.
Palantir Technologies (NASDAQ: PLTR)
Like MicroStrategy, investors should not view Palantir as a regular business intelligence company. Its flagship Gotham and Foundry platforms serve both intelligence communities and enterprises. Data integration, which then serves as a jumping point for actionable insight, is critical in politics and business.
But given that the border between politics and business is blurry, Palantir positions itself with a distinctive and lucrative advantage. Namely, Palantir’s co-founder, Peter Thiel, has been aligned with the Trump-Musk alliance, which even Big Tech moguls are now starting to support.
In the middle of this public-private partnership (PPP) influence web, Palantir’s revenue will likely receive a greater boost from even more lucrative USG contracts within the next four years. These factors triggered PLTR stock growth to record highs, up 340% year-to-date. Ahead of Nasdaq-100 listing, Palantir’s market cap is now $166.2 billion.
The average PLTR price target is $42.36 vs the press time price of $72.65, per WSJ forecast data.
Axon Enterprise (NASDAQ: AXON)
Since Axon Enterprise coverage in August, AXON stock is up 80%. The company is focused on public safety solutions, such as tasers, drones, sensors, cameras and digital evidence management. YouTube viewers in particular have grown familiar with seeing “Axon” on an ever-growing catalogue of highly popular bodycam videos.
But the demand for public transparency combined with rampant crime is just one part of Axon’s valuation. The company’s latest Draft One service will utilize AI to speed up police reports and transcribe bodycam audios. This should significantly free up limited law enforcement hours to actually combat crime instead.
In other words, within the new AI subscription-based initiative dubbed AI Era Plan, Axon is building another layer of income. In the last Q3 earnings, the company reported annual recurring revenue growth of 36% to $885 million, marking the 11th consecutive growth above 25%.
Year-to-date, AXON stock is up 152%, holding a market cap of $48.52 billion. The average AXON price target is $610.77 vs the press time price of $637.77, per WSJ forecast data.
Nasdaq-100 Losers
Moderna (NASDAQ: MRNA)
After the pandemic narrative ended, having brought into the public spotlight several controversial policies and therapeutics, it is safe to say that the mRNA acronym has become tainted. Unfortunately, Moderna boldly picked it as a symbol ticker.
Expectedly from prior R&D budget cuts, MRNA stock is exiting the Nasdaq-100 listing with a YTD loss of 62% and a shrunken market cap of $16.22 billion. However, given the prolonged suppressed stock state and potential for future large-scale contracts, the average MRNA price target is now $71.40 vs press time price of $41.98 per share, according to WSJ.
Illumina (NASDAQ: ILMN)
Illumina joins Moderna in exiting Nasdaq-100 as a genomics company that sells consumables and instruments needed for DNA sequencing. The trouble is this market is highly competitive. Furthermore, after acquiring cancer-testing Grail company for $8 billion in 2021, EU regulators ordered Illumina to divest in 2023.
In the latest Q3 earnings, the company reported 6% year-over-year revenue growth to $609 million. Although Illumina inverted its profitability, going from a net loss of $754M in the year-ago quarter to $705M net income, ILMN stock has largely moved sideways with a YTD gain of 8.3%.
The average ILM price target is $164 vs the press time price of $144.92 per share, according to WSJ forecasting. Illumina leaves Nasdaq-100 with a $22.94 billion market cap.
Super Micro Computer (NASDAQ: SMCI)
Lastly, Super Micro Computer is to exit Nasdaq-100 as the most notorious example of nepotism, opened up to the public spotlight in August’s Hindenburg Research report. This led to delisting threats, auditor resignation and eventually a sharp stock devaluation after the Nasdaq-100 removal announcement.
That said, Super Micro Computer is still likely to play a significant role in supplying AI data center infrastructure. After a leadership change in early December, the company may end up boosting shareholder confidence sooner than later.
The average SMCI price target is $31.14 vs press time price of $34 per share, according to WSJ forecasting. Year-to-date, SMCI stock is up 18%, exiting Nasdaq-100 with a $19.76 billion market cap.
Do you think more companies will follow Michael Saylor’s lead, effectively boosting the bottom line of MicroStrategy? Let us know in the comments below.
Disclaimer: The author does not hold or have a position in any securities discussed in the article.
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