The Nasdaq-100 Index (NDX) is often viewed as the territory of high-octane technology and communication services stocks. While that’s true, investors should also consider the benchmark’s exposure to consumer equities. The Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM) – the funds tracking NDX – currently allocate 13.27% of their respective weights to consumer discretionary stocks. That makes that the third-largest sector exposure in the funds.
And consumer staples names constitute 6.59%. So these ETFs have more exposure to consumer spending trends than they’re given credit for.
That’s a potential positive at a time when consumer spending and the broader U.S. economy remain sturdy. The ETFs’ holdings from the consumer cyclical run the gamut of providers of experiences that consumers are craving. The holdings also include purveyors of goods and services that are beloved by consumers.
Amazon Meaningful to QQQ, QQQM
The largest consumer discretionary holding in QQQ and QQQM is Amazon (AMZN), at a weight of 5.21%. That stock is up 85% over the past year and currently sports a market capitalization of $1.8 trillion. But that doesn’t imply gains from here are limited. Some analysts believe the opposite is true.
In a new report to clients, Deutsche Bank analyst Lee Horowitz reiterated a buy rating on Amazon. He lifted his price target to $210. He cited the potential for the company to boost advertising revenue via its Prime Video arm.
“1) Amazon has a clear path to $4-6bn of Prime Video advertising revenue in 24 and 25 suggesting that Street estimates that call for only $9-10bn of incremental Amazon Advertising revenue in 24 are too low. 2) As a result, Street Operating Incomes estimates are biased higher suggesting at least $3bn in Advertising related OI upside (5%) in 24. 3) we see meaningful long-term optionality to broader connected TV advertising at Amazon via the Promoted TV program. [That’s particularly so] as Generative AI lowers the barriers to entry to build compelling TV ad content for SMB advertisers,” according to the analyst.
