While the Nasdaq 100 (^NDX) is filled with cutting-edge technology and consumer companies, not all are on solid footing. Some are dealing with declining demand, high costs, or regulatory pressures that could limit future upside.
Investing in Nasdaq 100 stocks isn’t just about picking big names – it’s about finding the right ones, and that’s where StockStory comes in. Keeping that in mind, here are two Nasdaq 100 stocks that could lead the market and one that may struggle.
One Stock to Sell:
Warner Bros. Discovery (WBD)
Market Cap: $68.18 billion
Formed from the merger of WarnerMedia and Discovery, Warner Bros. Discovery (NASDAQ:WBD) is a multinational media and entertainment company, offering television networks, streaming services, and film and television production.
Why Should You Dump WBD?
-
Large revenue base makes it harder to increase sales quickly, and its annual revenue growth of 14.7% over the last five years was below our standards for the consumer discretionary sector
-
Low free cash flow margin of 8.8% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
-
Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
At $27.19 per share, Warner Bros. Discovery trades at 908x forward P/E. Dive into our free research report to see why there are better opportunities than WBD.
Two Stocks to Buy:
Microsoft (MSFT)
Market Cap: $3.03 trillion
Originally named “Micro-soft” for microcomputer software when founded in 1975, Microsoft (NASDAQ:MSFT) is a global technology company that develops software, cloud services, devices, and AI solutions for consumers, businesses, and organizations worldwide.
Why Are We Backing MSFT?
-
Microsoft is one of the great brands not just in tech but all of business. It produces mission-critical software and bundles it together, resulting in cream-of-the-crop gross margins.
-
The company’s elite unit economics lead to robust profit margins that improve over time. This speaks to the scale advantages and operating efficiency across its diverse portfolio, which spans everything from Office and Azure to Minecraft.
-
Microsoft has a virtuous cycle of returns. Its dominant market position enables it to generate strong free cash flow, and it reinvests these funds into promising ventures that further strengthen its competitive moat.
Microsoft’s stock price of $407.63 implies a valuation ratio of 22.3x forward price-to-earnings. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
