The Nasdaq-100 Index (NDX) is higher by nearly 20% year-to-date. Clearly, that’s good news for the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM), both of which track NDX.
An almost 20% gain in just three and a half months is impressive work for those exchange traded funds, and it might be enough to prompt some investors to believe upside for the duo from here is limited. Analysts covering some of the funds’ big holdings apparently disagree.
The bullish outlook for QQQ and QQQM is derived in part from Apple (AAPL), which is the second-largest holding in both ETFs at a weight of 12.24%.
“We believe iPhone demand was resilient during the quarter and therefore raise our revenue estimate to $93.27 billion from $92.19 billion (above consensus of $92.51 billion) and our EPS estimate to $1.45 from $1.43,” according to Credit Suisse.
The iPhone maker delivers quarterly results on May 4. In the interim, Apple is showing investors it is taking supply diversification seriously. In recent days, the California-based company revealed plans for manufacturing facilities in India and potentially Thailand in a bid to reduce its dependence on Chinese factories.
While QQQ and QQQM are growth-heavy ETFs, they each allocate 6.10% of their respective weights to the consumer staples sector. Analysts are bullish on PepsiCo (PEP) – the largest staples component in the Invesco funds.
“At PEP, we are opening a 30-day positive catalyst watch as we expect topline upside in the U.S. on strong scanner data trends and continued momentum in EMs, which should drive upside in Q1 and 2023 given conservative guidance,” according to a Citi note out Thursday.
Facebook parent Meta Platforms (META), which is rebounding sharply from last year’s woes, is a major communications services holding in QQQ and QQQM. Despite this year’s rally by the stock, some analysts believe it remains attractively valued with compelling quality traits.
“#1 META remains the cheapest of the high-quality ’Net and Tech Stocks with three under-appreciated product cycles likely to help generate a return to double-digit revenue growth,” noted Evercore ISI.
Elon Musk’s Tesla (TSLA), which ranks as the second-largest consumer cyclical holding in QQQ and QQQM, is also receiving sell-side adulation.
“TSLA’s leadership in scale, technology, manufacturing, cost, and depth of talent continue to differentiate it from competitors. We believe TSLA is best positioned to weather economic headwinds which appear imminent for 2H23 and believe the long-term setup is strong,” wrote Baird in a Thursday report to clients.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
