In 2025, Two Prudent Picks from the Nasdaq-100 Index, Alongside a Notable One to Shun
In the second year of Wall Street's continuing bull market rally, 2025 saw the major stock indexes breaking record highs. Yet, it was growth stocks that truly shined, with the Nasdaq-100 leading the charge. This index, comprised of the 100 largest non-financial public companies listed on the Nasdaq, ended 2024 with a 25% gain and a remarkable 92% increase over the two-year period.
artificial intelligence (AI) and stock splits sparked investor interest in growth stocks, and the Nasdaq-100 benefited greatly. However, as the year kicked off, the outlook for its constituents was decidedly mixed. Two Nasdaq-100 members stand out as potential no-brainer buys for 2025, while a recent addition should be avoided at all costs.
The First Nasdaq-100 Stock for 2025: Meta Platforms
Despite its stock soaring in the previous two years, Meta Platforms (META 3.85%) remains a compelling buy in the new year. The company's core social media operations, including Facebook, Instagram, WhatsApp, Facebook Messenger, and Threads, boast an impressive daily active user count of 3.29 billion—a significant milestone that sets it apart from the competition.
Meta's strategic position in the ad-driven market makes it well-suited for periods of sustained economic growth. Its cash reserves, totaling $70.9 billion, allow for share repurchases, dividends, and high-growth investments. Meta's planned $10.5 billion purchase of graphics processing units from Nvidia to improve its AI capabilities is just one example of its forward-thinking approach.
Looking ahead, Meta's share price is reasonably priced, valued at 24 times 2025 forecast earnings per share (EPS) and 21 times EPS in 2026. It's a solid valuation for expected annual EPS growth in the mid-teens.
The Second Nasdaq-100 Stock for 2025: Warner Bros. Discovery
Beaten-down media company Warner Bros. Discovery (WBD 0.62%) is another candidate for a strong buy in 2025, despite a seemingly bleak three-year track record. The company's recent restructuring into two separate business units – streaming and studios, and global linear networks – reflects its determination to unlock shareholder value and adapt to the evolving content landscape.
Warner Bros. Discovery has generated positive momentum in its streaming operations, with 110.5 million direct-to-consumer subscribers, a substantial increase compared to the prior year. Its international focus and higher subscription price points have also contributed to revenue growth in the streaming sector.
The Nasdaq-100 Stock to Avoid in 2025: MicroStrategy
On the other hand, Nasdaq-100 newcomer MicroStrategy (MSTR 5.39%) enters 2025 with a number of concerning factors that make it a better option to avoid. The company's stratospheric stock gains since 2023 are entirely due to its correlation with Bitcoin, the world's largest cryptocurrency.
MicroStrategy's decision to accumulate Bitcoin through debt and share issuances is a concerning red flag. The company's negatively impacted net cash flows cannot support its debt-servicing costs. Additionally, MicroStrategy's Bitcoin portfolio is being overvalued, which could lead to a significant decline in its stock value.
In conclusion, 2025 looks promising for growth stocks, with Meta Platforms and Warner Bros. Discovery presenting strong potential as no-brainer buys. However, MicroStrategy's questionable practices and reliance on a highly volatile asset like Bitcoin make it a risky choice for investors.
Investors showing interest in growth stocks due to AI and stock splits found the Nasdaq-100 to be a significant beneficiary. The company Meta Platforms, with its impressive daily active user count of 3.29 billion and strategic position in the ad-driven market, is viewed as a compelling buy in 2025, with a reasonable stock price and expected mid-teens EPS growth. On the other hand, MicroStrategy, known for its correlation with Bitcoin, is advised to be avoided due to its questionable debt-financed Bitcoin purchases and reliance on a highly volatile asset.
