Optimistic Predictions for the Nasdaq: Key Tech Stocks to Consider for 2025

As we enter a new year, many investors are reflecting on the previous year's market performance, which showed promising trends. The Nasdaq Composite (^IXIC) was a standout performer, up by 29% last year, building on a 43% gain in 2023. These bullish market indicators suggest that the Nasdaq could have further potential to rise in 2025.

The Nasdaq began trading in 1972, and historical data shows that in the 13 years that followed a gain of 29% or more, the index has been in the green 11 times, averaging an additional 19% return on those occasions. While individual results can vary, these trends indicate a strong possibility of continued growth for the tech-focused index in the upcoming year.

If the Nasdaq indeed continues its upward trajectory into 2025, here are two tech stocks that investors might want to consider adding to their portfolios.

PayPal: Rising from Challenges

PayPal (PYPL) was once a dominant player in the digital payments sector, but it faced difficulties in recent times. After a period of strong growth during the pandemic, the company encountered tough comparisons and slowing sales, particularly due to economic challenges.

However, PayPal appears to be on a recovery path. In its most recent quarterly report, the company achieved revenue growth of 6% year over year, totaling $7.8 billion, while adjusted earnings per share rose by 22% to $1.20. This growth was propelled by a 9% increase in total payment volumes and a similar growth in the number of transactions.

Encouragingly, PayPal's number of active accounts has increased by 3 million in the last quarter, with transactions per account also jumping by 9%. While growth from its branded checkout service has slowed, PayPal is diversifying its offerings. Initiatives like PayPal Everywhere, which includes a branded debit card and enhanced rewards, are beginning to yield positive results.

Additionally, their Fastlane tool for guest checkouts is gaining traction among online retailers, contributing to increased sales. The company's CFO has also indicated an expectation for transaction margins to expand in 2025, further positioning PayPal for growth.

On Wall Street, PayPal is receiving bullish attention. Of 46 analysts surveyed in January, 26 rated the stock as a buy or strong buy. The average price target sits at $94, reflecting potential gains of around 7% for investors. Notably, JMP Securities believes PayPal's prospects are being undervalued and has set a price target of $125, indicating a potential upside of 42%.

Furthermore, PayPal shares are trading at just 21 times earnings, significantly lower than its historical average of 45 and the wider S&P 500 average of 30, making it an attractive buy for those looking to capitalize on future growth.

Shopify: Recovering Strength

Similarly, Shopify (SHOP) saw explosive growth during the pandemic but has struggled with a downturn as digital retail faced significant challenges and strong year-over-year comparisons. With the economy rebounding, Shopify is benefiting from an increase in disposable income and a resurgence in demand for its digital retail solutions.

For the latest quarter, Shopify reported an impressive 26% increase in revenue year over year, reaching $2.16 billion, and operating income surged by 132% to $283 million. The company's monthly recurring revenue also expanded by 28%, while gross merchandise volume rose by 24%.

Management expects this growth to persist, projecting mid-to-high 20s revenue growth for the next quarter. Shopify continues to innovate, introducing features like Shopify Flow, which allows merchants to create customized automation tools that streamline their processes.

AI-driven tools within Shopify Inbox are helping merchants respond to customer inquiries more efficiently, boosting sales conversion rates. Additionally, these tools support loyalty program management, inventory management, and fraud prevention.

Shopify has also reported impressive sales during major retail events like Black Friday through Cyber Monday, achieving $11.5 billion in sales during that period, a 24% year-over-year increase. It now serves a massive customer base globally, with many merchants experiencing record sales days.

Wall Street analysts are optimistic about Shopify as well. Out of 52 analysts, 31 have rated the stock as a buy or strong buy, with no sell recommendations. The average price target stands at $119, signaling potential gains of 12%, while Loop Capital sets an even higher target of $140, representing an upside of 31%.

Despite a challenging environment, Shopify's current valuation is attractive, trading at 17 times sales, well below its five-year average multiple of 26, suggesting it is historically cheap.

In conclusion, as the Nasdaq shows signs of potential growth, both PayPal and Shopify are positioned to benefit significantly from the expected rally in 2025. Investors may want to consider these technology stocks as they prepare for the upcoming year.

Nasdaq, PayPal, Shopify