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. That said, here are two Nasdaq 100 stocks that have huge potential and one that may struggle.
One Stock to Sell:
Tesla (TSLA)
Market Cap: $1.58 trillion
Originally founded by Martin Eberhard and Marc Tarpenning in 2003, Tesla (NASDAQ: TSLA) is an electric vehicle company accelerating the world’s transition to sustainable energy.
Why Do We Steer Clear of TSLA?
- Tesla's scale advantage in EV production leads to gross margins that exceed incumbents such as General Motors and Ford. However, a softer macroeconomic backdrop and tariff pressures have weighed on automobile sales, which are highly cyclical.
- The company's execution ability is a question mark given its long history of delays, such as the Cybertruck and Robotaxi launches. Its sizeable investments in projects with uncertain return timelines, like Optimus, also raise skepticism from investors.
- On the bright side, Tesla's Megapack product solves a critical problem for utilities needing renewable energy storage solutions. This innovation has made the energy segment the most profitable and fastest-growing business line for the company.
At $473.84 per share, Tesla trades at 241.4x forward price-to-earnings. Check out our free in-depth research report to learn more about why TSLA doesn’t pass our bar.
Two Stocks to Watch:
Electronic Arts (EA)
Market Cap: $51.08 billion
Best known for its Madden NFL and FIFA sports franchises, Electronic Arts (NASDAQ: EA) is one of the world’s largest video game publishers.
Why Is EA Interesting?
- Iconic platform is known by nearly everyone in its market, allowing it to acquire new users at little to no cost
- Healthy EBITDA margin of 32.9% shows it’s a well-run company with efficient processes
- Strong free cash flow margin of 24.7% enables it to reinvest or return capital consistently, and its improved cash conversion implies it’s becoming a less capital-intensive business
Electronic Arts’s stock price of $204.76 implies a valuation ratio of 15.7x forward EV/EBITDA. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Vertex Pharmaceuticals (VRTX)
Market Cap: $117.4 billion
Founded in 1989 with a mission to create medicines that treat the underlying causes of disease rather than just symptoms, Vertex Pharmaceuticals (NASDAQ: VRTX) develops and markets transformative medicines for serious diseases, with a focus on cystic fibrosis, sickle cell disease, and pain management.
Why Could VRTX Be a Winner?
- 14.4% annual revenue growth over the last five years surpassed the sector average as its offerings resonated with customers
- Robust free cash flow margin of 25.4% gives it many options for capital deployment, and its rising cash conversion increases its margin of safety
- ROIC punches in at 43%, illustrating management’s expertise in identifying profitable investments
Vertex Pharmaceuticals is trading at $462.87 per share, or 23.1x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
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