The Nasdaq 100 (^NDX) is home to some of the biggest success stories in tech and growth investing. However, certain stocks in the index face challenges like profitability concerns, rising costs, or shifts in market trends.
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 is one Nasdaq 100 stock that has huge potential and two that may face some trouble.
Two Stocks to Sell:
Cisco (CSCO)
Market Cap: $262.6 billion
Founded in 1984 by a husband and wife team who wanted computers at Stanford to talk to computers at UC Berkeley, Cisco (NASDAQ: CSCO) designs and sells networking equipment, security solutions, and collaboration tools that help businesses connect their systems and secure their digital operations.
Why Is CSCO Not Exciting?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Free cash flow margin shrank by 5.7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Waning returns on capital imply its previous profit engines are losing steam
Cisco is trading at $66.52 per share, or 17x forward P/E. If you’re considering CSCO for your portfolio, see our FREE research report to learn more.
CoStar (CSGP)
Market Cap: $33.6 billion
With a research department that makes over 10,000 property updates daily to its 35-year-old database, CoStar Group (NASDAQ: CSGP) provides comprehensive real estate data, analytics, and online marketplaces for commercial and residential properties in the U.S. and U.K.
Why Are We Wary of CSGP?
- Efficiency has decreased over the last five years as its adjusted operating margin fell by 23.7 percentage points
- Earnings per share fell by 4% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 16.6 percentage points
CoStar’s stock price of $79.60 implies a valuation ratio of 75x forward P/E. Dive into our free research report to see why there are better opportunities than CSGP.
One Stock to Buy:
The Trade Desk (TTD)
Market Cap: $33.54 billion
Founded by former Microsoft engineers Jeff Green and Dave Pickles, The Trade Desk (NASDAQ: TTD) offers cloud-based software that uses data to help advertisers better plan, place, and target their online ads.
Why Is TTD a Top Pick?
- Billings growth has averaged 26.1% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
- Highly efficient business model is illustrated by its impressive 17.6% operating margin, and it turbocharged its profits by achieving some fixed cost leverage
At $68.38 per share, The Trade Desk trades at 11.6x forward price-to-sales. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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