The Nasdaq-100 is one of the world’s preeminent large-cap growth indexes. It includes 100 of the largest domestic and international non-financial companies that are listed on the Nasdaq exchange. The index reflects companies across major top-performing industry groups, with its largest allocations going to technology and consumer services.
After being pummeled in the first quarter of 2020, the broader market proved unstoppable for the rest of the year. The COVID-19 pandemic accelerated the pace of digital transformation, as individuals and businesses began relying heavily on technology to remain functional. This created an enormous opportunity for most tech companies, and investors have rushed to reward the prominent players. The tech-heavy Nasdaq-100 thus became the first major U.S. stock index to rebound from its coronavirus decline in June 2020. The index closed the year with a whopping 47.6% gain, significantly outperforming the S&P 500’s 16.1% returns.
Here are four stocks that skyrocketed last year based on their pandemic-ready business models to become the best-performing stocks in the Nasdaq-100 index: Tesla, Inc. (TSLA), NVIDIA Corporation (NVDA), PayPal Holdings, Inc. (PYPL) and JD.com, Inc. (JD).
Tesla, Inc. (TSLA)
TSLA designs, develops, manufactures, and sells electric vehicles (EVs), EV powertrain components, and stationary energy storage systems in the U.S., China, and internationally. TSLA operates primarily through the following segments – Automotive, Energy Generation and Storage.
On January 2, TSLA said it delivered a record 180,570 vehicles during the fourth quarter of 2020, rising nearly 30% compared to the preceding quarter. The company delivered 499,550 vehicles in 2020 but fell short of CEO Elon Musk’s target of 500,000.
TSLA plans to launch three new electric vehicles soon, including the Tesla Cybertruck and two electric cars. Moreover, after months of speculation, last month TSLA was finally added to the S&P 500 Index after five consecutive quarters of profit. It was also added to the S&P 100 list.
In the third quarter, the company generated $8.77 billion in revenue, growing 39% year-over-year, driven by 44% year-over-year rise in vehicle deliveries. Its energy generation and storage segment generated $579 million in revenue, rising 44% year-over-year as the business hit record deployments of 759 MWh. Its non-GAAP EPS came in at $0.76, more than doubling year-over-year.
TSLA is reportedly planning to launch its products in India this year and further expand in China, while opening new factories in Texas and Germany. The company is actively undertaking efforts to reduce battery costs through extensive battery technology development. It aims to integrate a tab-less battery system in its vehicles, which should significantly increase its profitability.
Analysts expect TSLA’s revenues and EPS to grow 46.4% and 69.3%, respectively, this year. And its EPS is expected to grow at a rate of 396.7% per annum over the next five years.
TSLA garnered huge momentum with the onset of the pandemic–thanks to the EV boom—to end 2020 with a 696.5% gain. The stock has climbed 82.6% in the past three months to close yesterday’s trading session at $755.98 after hitting its 52-week high of $774.00.
How does TSLA stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
A for Industry Rank
A for Overall POWR Rating
You cannot ask for better. The stock is also ranked #1 of 39 stocks in the Auto & Vehicle Manufacturers industry.
NVIDIA Corporation (NVDA)
As one of the key suppliers of the steadily expanding global gaming industry, NVDA operates as a visual computing company worldwide. It deals in graphics processing units (GPU), PC gaming, tegra processor and artificial intelligence (AI). NVDA is well positioned to grow because gaming, AI, cloud computing and autonomous machines are expected to drive the next industrial revolution.
NVDA has been forming alliances to advance its AI capabilities. The company recently forged a collaboration with Amazon Web Services to provide 21 NVDA NGC software resources on the AWS platform. The company is also collaborating with intelligent robotaxi manufacturer Zoox to power its vehicles. In September, NVDA announced a definitive agreement to acquire Arm Limited from SoftBank Capital Limited and SVF Holdco (UK) Limited to combine with Arm’s vast ecosystem. However, it is currently under investigation by the U.K.’s competition regulator.
NVDA has a strong history of sales and earnings growth. In its fiscal third quarter ended October 31, 2020, the company reported a record top-line of $4.73 billion, growing 57% year-over-year. It also delivered record Gaming revenue and Data Center business revenue, increasing 37% and 162%, respectively, from the comparable quarter last year. Its non-GAAP EPS came in at $2.91, rising 63% from the year-ago value.
NVDA is well positioned to grow because gaming, AI, cloud computing and autonomous machines are expected to drive the next global industrial revolution. The expansion of NVIDIA GeForce NOW is expected to expand NVDA’s user base. In its third-quarter letter to shareholders, NVDA noted, “Our A100 compute platform is ramping fast, with the top cloud companies deploying it globally.” Moreover, analysts expect current-year revenue and EPS to rise 51% and 67.9%, respectively.
NVDA gained 121.2% in the previous year and is up nearly 28% in the past six months. The stock closed yesterday’s trading session at $504.58 and is currently trading 14.3% below its 52-week high of $589.07.
NVDA’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with a “B” for Buy & Hold Grade and Industry Rank. It is ranked #46 of 96 stocks in the Semiconductor & Wireless Chip industry.
PayPal Holdings, Inc. (PYPL)
PYPL is one of the most popular digital payment operating technology platforms that enables digital and mobile payments on behalf of consumers and merchants worldwide. It has more than 361 million active users globally and is available in more than 200 markets around the world, enabling consumers and merchants to receive money in more than 100 currencies.
As part of the second round of U.S. government-issued stimulus checks, PYPL has waived the check-cashing fees associated with its cash-a-check feature on PayPal and Venmo, enabling its customers to access funds remotely, free-of-charge. Moreover, in line with the spike in the crypto rates in recent years, in October PYPL launched a new service that enables its customers to trade cryptocurrencies directly from their PayPal accounts.
In the last reported third quarter, PYPL added more than 15.2 million new accounts. Its top-line increased 25% year-over-year to $5.46 billion. The company generated total payment volume (TPV) of $247 billion, growing 38% from the year-ago quarter. Merchant Services volume surged 40% and represented 93% of TPV. Its EPS for the quarter came in at $0.86, rising 121% year-over-year.
The company has largely benefited from the spike in e-commerce sales amid the pandemic. The shift to digital payments is one of the major trends that we believe will accelerate over the next couple of decades. Hence, analysts expect PYPL’s current year revenue and EPS to rise 18.6% and 18.9%, respectively.
PYPL gained 115.3% in 2020, benefitting from progress in the trajectory of domestic digital spending. The stock closed yesterday’ at $226.83, rising 18.4% in the past three months. PYPL is currently trading 7% below its 52-week high of $244.25.
It is no surprise that PYPL is rated “Buy” in our POWR Ratings system. It also has an “A” for Trade Grade and Industry Rank, and a “B” for Buy & Hold Grade and Peer Grade. It is ranked #3 of 53 stocks in the Consumer Financial Services industry.
JD.com, Inc. (JD)
JD is the second-largest online retailer in the People’s Republic of China, operating as an e-commerce company and retail infrastructure service provider. It offers electronics & home appliances and general merchandise products. The company sells its products directly to customers through its website and mobile applications. It operates primarily through the following segments – JD Retail, JD Health and JD Logistics.
On December 5, JD announced that it has become China’s first virtual platform to accept the country’s digital yuan as payment for some products on its online mall. This allows the company to solidify its position as one of the best organizations in the country, while ironing out the kinks in the digital currency system before its nationwide rollout. Additionally, the previously delayed IPO of JD’s fintech subsidiary, JD Digits, is now expected to move ahead in the next few months.
JD’s revenue has increased 29.2% year-over-year $25.70 billion for the third quarter ended September 30, 2020. The company’s revenue from the sale of general merchandise products rose 34.8%, while service revenue has increased 42.7%. Its annual active customer accounts surged by 32.1% to 441.6 million in the 12months ended September 30, 2020. Moreover, its non-GAAP EPS for the quarter grew 64.4% year-over-year to $0.50.
E-commerce stocks hit unprecedented heights last year, due largely to the widespread adoption of virtual shopping when traditional brick-and-mortar stores were forced to close. With the largest drone delivery fleet in the world, JD is well positioned to become the largest e-commerce channel in China soon, especially now that Alibaba Group (BABA) is under regulatory investigation. Wall Street analysts further expect JD’s current-year revenues and EPS to grow 23% and 61.2%, respectively.
JD ended 2020 with a 113.4% gain. The stock has seen huge momentum since the onset of the pandemic, despite the ongoing trade war between the U.S. and China, , to hit its 52-week high of $96.20 on Tuesday. JD closed yesterday’s trading session at $88.18, and is up nearly 15% in the past three months.
JD’s POWR Ratings reflect a promising outlook. It has an overall rating of “Buy” with an “A” in Trade Grade and Peer Grade, and a “B” in Buy & Hold Grade and Industry Rank. Among the 119 stocks in the China group, it is ranked #2.
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TSLA shares were trading at $802.01 per share on Thursday morning, up $46.03 (+6.09%). Year-to-date, TSLA has gained 13.65%, versus a 1.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...
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