MicroStrategy’s (MSTR) addition to the Nasdaq-100 is a significant milestone, but its potential inclusion in the S&P 500 index could present an even greater opportunity in the medium term, according to a report by broker Benchmark on Monday.
On Friday, the index provider announced that MicroStrategy would be added to the Nasdaq-100 on December 23. While the company meets the market cap and trading volume criteria for inclusion in the S&P 500, it still needs to satisfy two additional requirements, the report stated.
According to analyst Mark Palmer, MicroStrategy must report positive earnings for the most recent quarter and show total positive earnings over the trailing four consecutive quarters. However, the company plans to adopt new Financial Accounting Standards Board (FASB) guidance for the accounting treatment of bitcoin held on its balance sheet in the first quarter of 2025. This would position the company to immediately begin reporting positive earnings.
MicroStrategy’s entry into the Nasdaq-100 will also make it the 40th largest firm in the index, with a 0.47% weighting, according to broker Bernstein. This development is particularly notable because the Invesco QQQ Trust Series ETF, the fifth-largest ETF by assets under management (AUM), will now include MicroStrategy in its portfolio.
Invesco QQQ is part of the three largest ETFs by AUM, all of which are composed of S&P 500 companies. These three ETFs—SPDR S&P 500 (SPY), Vanguard S&P 500 (VOO), and iShares Core S&P 500 (IVV)—hold over $1.8 trillion in combined AUM.
The potential impact of MicroStrategy’s future S&P 500 inclusion could be significant. For instance, Tesla (TSLA) saw a major boost in its stock price after joining the S&P 500 on December 21, 2020, with shares doubling from $200 to $400 within a year. A large portion of Tesla’s gains occurred before its S&P 500 inclusion, suggesting that MicroStrategy could experience significant gains prior to joining the benchmark index.
