In a significant adjustment to the Nasdaq 100 index, Palantir Technologies (PLTR) will replace Super Micro Computer (SMCI), effective before the market opens on December 23. Additionally, MicroStrategy (MSTR) and Axon Enterprise (AXON) will also join the NDX, while Moderna (MRNA) and Illumina (ILMN) will be removed. These changes are part of the Nasdaq-100 Index’s annual reconstitution that occurs each December, ensuring an accurate representation of the market’s largest non-financial companies.
What Palantir’s Nasdaq 100 addition could mean for your portfolio
Super Micro Computer’s exclusion comes on the heels of a 59% decline in its market value over the past six months. The company faces financial hardships, including potential delisting due to delays in filing its annual report, following allegations of accounting fraud from Hindenburg Research. In contrast, Palantir has reported a remarkable 204% increase in its stock price this year, which solidified its standing in the index. Its focus on AI-driven software and a robust client base, including various government agencies and commercial entities, has driven this growth.
Both MicroStrategy and Axon have also shown impressive stock performance this year. MicroStrategy’s stock surged 171%, largely attributed to the rising value of its Bitcoin investments. Meanwhile, Axon, which manufactures body cameras and safety technology for law enforcement, saw a 117% increase, driven by escalating demand for its products.
The addition of Palantir, MicroStrategy, and Axon to the Nasdaq 100 index will likely enhance their visibility in the market. Mutual funds, ETFs, and other financial instruments tracking the index will be required to purchase shares of these companies, thus increasing demand. This could further support a rise in their respective share prices.
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In conjunction with the positive market movements for Palantir and the other new additions, Moderna’s decline of approximately 70% over the past six months stands out starkly. The drop is largely due to waning demand for COVID-19 vaccines, which has heavily impacted its revenue stream. Illumina’s stock also faced challenges, increasing only by 6% this year, as it continues to grapple with market pressures.
Palantir’s third-quarter financial results, released last month, demonstrated substantial growth, with revenue up 30% and adjusted earnings per share gaining 43%, both surpassing analyst expectations. As a result, management has raised its guidance for full-year 2024 across several financial metrics, including revenue and operating profit. Such enhancements, following the company’s overall market performance, further justify its inclusion in the Nasdaq-100.
While analysts rate MicroStrategy and Axon with a Strong Buy consensus, Illumina is rated a Moderate Buy. Conversely, Palantir, Super Micro, and Moderna hold a “Hold” rating. Analysts project upside potential for MRNA, MSTR, and ILMN at 49%, 30%, and 14% respectively.
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Featured image credit: Palantir
