The Nasdaq-100 Index (NDX) is higher by 3.74% year-to-date. However, the widely followed benchmark is off 4.83% over the past week. The decline could give some investors pause about the near-term fates of some of the index’s high-flying holdings. On the other hand, some experts see more upside on the way for some marquee names in the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM) – the exchange traded funds tracking NDX.
QQQ and QQQM are homes to an array of growth stocks that have notched impressive one-year and year-to-date showings. Some of which have retreated in recent weeks alongside the broader technology sector.
That pullback is widely viewed as healthy and one that could positively reset valuations on some of the popular stocks residing in QQQ and QQQM. The implication here is that a coveted buying opportunity could be afoot for investors considering the Invesco ETFs.
NDX Earnings Matter for QQQ
Alphabet (GOOG), Amazon (AMZN), and Microsoft (MSFT), each of which deliver earnings reports this week, are among the QQQ/QQQM holdings that could be primed to bounce back over the near term. The companies’ respective cloud computing units could drive potential rebounds.
“I’m assuming that they’re probably all going to come in in line, probably slightly better than expected. The economy’s been relatively strong. I think we’re going to look for continued growth in that cloud business, relatively stable to slightly improving margins. So I think that if they can all come in within those kind of parameters, it should look fine,” noted Morningstar’s Dave Sekera.
He points out that Google’s parent Alphabet is trading at a 10% discount to fair value. Those three stocks combine for more than 19% of the QQQ/QQQM rosters. Some underappreciated holdings in the ETFs could contribute to rebounds.
Due to the substantial allocations to technology and communication services stocks found in QQQ and QQQM, it’s often looked that the funds have some exposure to the healthcare sector. This group could also contribute to near-term rallies for the ETFs. On that note, Biogen (BIIB), which Sekera says is deeply undervalued, is a name to keep an eye on.
“I note the stock has been under pressure. It is losing its patent on one of its drugs. And so it will be facing some competition here,” observed the analyst. “But our team has noted that Biogen is in the midst of expanding its portfolio beyond multiple sclerosis into neurology, neuromuscular diseases, and Alzheimer’s. So I think the story here is that we think that the market currently underestimates Biogen’s pipeline.”
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