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Investing Insights: Key Nasdaq-100 Stocks for 2025
The second year of Wall Street’s bull market has been promising. All three major stock indexes reached multiple record-closing highs throughout 2024, with growth stocks taking the lead.
The Nasdaq-100, which includes 100 of the largest non-financial public companies listed on the Nasdaq stock exchange, saw an impressive gain of 25% last year, totaling a remarkable 92% increase over the two-year period from the start of 2023 to the end of 2024. This growth was largely driven by the rise of artificial intelligence (AI) and a wave of excitement around stock splits, attracting investors to many of the Nasdaq-100’s constituents.
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Moving into 2025, the outlook for companies in this high-performing index varies significantly. While two Nasdaq-100 stocks stand out as great investments for the coming year, another recent addition raises concerns for potential investors.
Top Buy for 2025: Meta Platforms
First on the list for confident investment this year is Meta Platforms (NASDAQ: META). Despite its stock’s impressive performance over the last two years, Meta is positioned well for continued growth.
While the spotlight is on Meta’s AI integration and ambitions in the metaverse, we must not overlook its core social media operations, which remain vital to the company’s revenue and cash flow.
In the quarter ending September, Meta’s suite of apps, including Facebook, Instagram, WhatsApp, Facebook Messenger, and Threads, attracted an astonishing 3.29 billion daily active users. No competitor comes close to this level of user engagement, which gives Meta significant pricing power with advertisers.
Ad-driven businesses, like Meta, thrive during long periods of economic growth. Although recessions are typical in economic cycles, they tend to be brief. A buy-and-hold strategy for a top advertising firm like Meta has historically been fruitful for investors.
Moreover, Meta’s financial health strengthens its position in the market. By the end of the third quarter, it held $70.9 billion in cash, cash equivalents, and marketable securities while generating over $21 billion in net cash from operations each quarter. This liquidity enables Meta to repurchase shares, pay dividends, and invest in future growth.
For example, Meta plans to spend about $10.5 billion on acquiring 350,000 graphics processing units from Nvidia to enhance its AI-driven data centers, demonstrating the positive impact of AI on its advertising business.
Lastly, Meta’s valuation remains attractive. Its shares are priced at 24 times estimated earnings per share (EPS) for 2025 and 21 times EPS for 2026, a reasonable rate considering expected annual EPS growth in the mid-teens.
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Another Strong Choice: Warner Bros. Discovery
Another Nasdaq-100 stock that shows promise for 2025 is the underperforming media giant Warner Bros. Discovery (NASDAQ: WBD). Although shares have fallen slightly by 8% over the last year, they have drastically dropped by 62% in the past three years.
Legacy media companies face challenges as consumer habits shift away from traditional cable toward streaming options. This evolution impacts content costs and advertising revenue for established media networks. Despite these hurdles, Warner Bros. Discovery has potential for recovery.
An encouraging development is the company’s reorganization into two distinct divisions: streaming and studios/global linear networks. While the latter has struggled from debt and loss of subscribers, the streaming segment is gaining traction. This restructuring may pave the way for mergers or acquisitions with other streaming services and improve shareholder value.
As of September, Warner Bros. Discovery had 110.5 million direct-to-consumer subscribers, marking a 14.6 million increase from the previous year. Importantly, the company is seeing rising revenues thanks to increased subscription fees and successful expansion into international markets. Strong pricing power is vital for securing sustainable profits from streaming.
Warner Bros. Discovery is also not shying away from strategic partnerships to broaden its reach. In September, it teamed up with Charter Communications to offer Max and Discovery+ content within Charter’s Spectrum TV Select packages.
Similar to Meta, Warner Bros. Discovery is a strong cash generator. Though its profits have lagged since the merger in April 2022, it has produced $2.66 billion in net cash from operations in the first nine months of 2024. This cash flow will aid in reducing debt and investing in streaming capabilities.
Currently, Warner Bros. Discovery’s stock is trading at a 32% discount to its book value, making it a solid buy for investors.
Stock to Avoid in 2025: MicroStrategy
Conversely, not every Nasdaq-100 stock is worth your investment. The latest addition to this flourishing index, MicroStrategy (NASDAQ: MSTR), is one to avoid in 2025.
While MicroStrategy’s enterprise software division has been its primary revenue driver for years, the company’s stock has skyrocketed more than 2,200% since the beginning of 2023, primarily due to its connection with Bitcoin, the world’s largest cryptocurrency (CRYPTO: BTC).
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MicroStrategy’s Bold Bitcoin Strategy Faces Financial Strains
MicroStrategy has made headlines as the first publicly traded company to label itself a “Bitcoin Treasury Company.” CEO Michael Saylor aims to amass a significant Bitcoin reserve, with the firm holding 447,470 Bitcoins as of January 6, 2025. This total represents 2.13% of all Bitcoin ever expected to be mined.
However, Saylor’s aggressive Bitcoin accumulation strategy raises several concerns.
Funding Methodology Raises Questions
To finance these Bitcoin purchases, Saylor has relied on a mix of convertible debt offerings and ongoing stock issuances. A recent filing from December revealed plans to increase MicroStrategy’s total shares from 330 million to 10.33 billion. Such drastic dilution may negatively impact the company’s stock and shareholder value.
Challenging Financial Performance
Despite MicroStrategy’s annual debt servicing costs of just over $35 million, its software division has not generated sufficient cash flow to meet these obligations.
Bitcoin Valuation Concerns
The value of MicroStrategy’s Bitcoin holdings is being marked at a puzzling premium. Bitcoin is currently priced at $94,812 per token, leading to an estimated worth of $42.4 billion for the company’s 447,470 Bitcoins on January 12. Nevertheless, MicroStrategy’s market capitalization stood at $80.6 billion at that time.
Investors seem to be attributing a $1 billion valuation to MicroStrategy’s struggling software segment. Consequently, the company’s Bitcoin is priced at an 88% premium over its net asset value. In simple terms, investors are spending $178,000 for each Bitcoin held by MicroStrategy, even though they could purchase it directly on a crypto exchange for $94,812. This premium is not expected to hold, leading to speculation that MicroStrategy’s stock may suffer significant losses in 2025.
Looking Ahead: Investment Considerations
For those considering investments in the tech sector, it’s worth noting that Meta Platforms, while a notable name, has not made the cut for a recent list of the 10 best stocks recommended by the Motley Fool Stock Advisor analyst team. Historically, being on this list has proven beneficial, as seen with Nvidia, which yielded a staggering 816,504% return for early investors.
See the 10 stocks »
*Stock Advisor returns as of January 13, 2025
Randi Zuckerberg, a former market development director at Facebook, is on The Motley Fool’s board. Sean Williams holds positions in Meta Platforms and Warner Bros. Discovery, and The Motley Fool endorses Bitcoin, Meta Platforms, Nvidia, and Warner Bros. Discovery. For full disclosure, please visit The Motley Fool’s disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
