The Nasdaq Composite (^IXIC 1.77%) has been a great performing index, as it beat the broader S&P 500 (^GSPC 1.26%) in 2024 by rising 28.6% versus the S&P 500's 23.3%. It wouldn't surprise me to see those results again in 2025, but I think a few companies within the Nasdaq Composite can outperform the broader index in 2025.
These stocks are Meta Platforms (META 0.90%), Alphabet (GOOG 1.31%) (GOOGL 1.25%), ASML (ASML 1.99%), PayPal (PYPL 1.65%), and MercadoLibre (MELI 3.92%). I think all five of these stocks are solid buys for 2025, and investors would be smart to take a position in them now.
AI Plays: Meta, Alphabet, and ASML
Artificial intelligence (AI) was a huge investment theme in 2023 and 2024, and I expect it to be no different in 2025. Meta, Alphabet, and ASML are a few of my favorite AI investments, but for different reasons.
Meta and Alphabet are probably better known by their flagship properties, Facebook and Google. These two giants make most of their money on advertising and have significant AI investments. Knowing what ads to put in front of a consumer is key, and developing leading AI models is one way to achieve that goal. Google Gemini and Meta's Llama are their two generative AI platforms, and each is near the top of the list of best-performing models.
Despite their dominant market position in advertising and solid progress in the AI arms race, these two trade for attractive price tags.
META PE Ratio (Forward) data by YCharts
At 23 times forward earnings for Meta and 21.2 times for Alphabet, both stocks are significantly cheaper than the Nasdaq 100 index, which has a forward price-to-earnings (P/E) ratio of 27.1. This makes these two stocks steals at their current price tags, and investors should take advantage of them in 2025.
ASML is an entirely different AI investment, as it makes machines vital in microchip production. Its extreme ultraviolet (EUV) lithography machines trace the microscopic etches on chips. ASML is the only company in the world with this technology, giving it a monopoly in the space. However, Western governments have stepped in and prevented ASML from selling certain machines to China and its allies, which has caused ASML to reduce its 2025 guidance.
This announcement caused the stock to plummet, but ASML's management was confident that the long-term investment growth picture was still intact. In fact, management didn't even change its 2030 revenue guidance from the previous ranges given in 2022.
With its monopoly and strong growth projection for multiple years, ASML seems like a no-brainer investment. However, it's down around 35% from its all-time high, which presents a massive investment opportunity.
Value investments: PayPal and MercadoLibre
While the previous three stocks are for more of a growth investment style, PayPal and MercadoLibre both provide significant value opportunities.
PayPal's recovery under relatively new CEO Alex Chriss has been strong. The company is starting to see some of its changes pay off, and free cash flow has risen dramatically since he took over in September 2023.
PYPL Free Cash Flow data by YCharts
This allows PayPal to repurchase shares, which they have done in a dramatic fashion. PayPal's share count has fallen 7% in the short time Chriss has been at the helm, and all signs point toward PayPal continuing to reduce share count. As a result, PayPal should see solid earnings growth, which should translate into a market-beating stock.
MercadoLibre is the e-commerce giant in Latin America, but it also has a fintech division similar to PayPal for its client base. Because of some bad debt in its credit card division, MercadoLibre's profits took a hit, which the market didn't appreciate. This caused the stock to plummet, and recenty it was 20% down from its all-time highs.
However, this weakness is only expected to last for a short amount of time, as Wall Street analysts project 38% earnings per share (EPS) growth in 2025. For a stock that's trading at 38 times forward earnings, that level of growth seems like a steal.
There's a ton of growth left in Latin America, and MercadoLibre is the best way to invest in it. MercadoLibre has been a long-term winning investment, and I expect it to be no different in 2025.
