Walmart Isn't on Nasdaq 100 Index — Yet
Retailer Switched From NYSE This Week, Missing Cutoff for Index Data
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Walmart Inc. ditched the New York Stock Exchange for archrival Nasdaq this week, marking the largest defection of a stock listing in the Big Board’s history.
Now, the question on investors’ minds is when the retailer will be added to the influential Nasdaq 100 Index. Anyone hoping for that to happen Dec. 12 as part of an annual reconstitution of the index may be disappointed, according to analysts.
That’s because Walmart’s listing switch missed the cutoff date used by the index provider to gather necessary market information, according to Kaasha Saini, head of index strategy at Jefferies Financial Group Inc. To be considered for inclusion in the annual reconstitution, stocks typically must meet certain criteria — including having their primary listing on Nasdaq — by the last trading day of November, which was Nov. 28 this year.
Joining the index is advantageous to the stock since many large, passively managed funds — such as the $408 billion Invesco QQQ Trust Series 1 exchange-traded fund — must own shares of all of the members of the gauge. Jefferies analysts estimate that nearly $19 billion could flow into the retailer’s shares if it’s added. Other benchmark indexes, such as the S&P 500 and Dow Jones Industrial Average, do not include stock-exchange listings among their selection criteria.
While Walmart may not get the nod Dec. 12, stocks with a better chance of meeting the criteria include Alnylam Pharmaceuticals Inc., Seagate Technology Holdings PLC, Western Digital Corp, Ferrovial Se, Monolithic Power Systems Inc. and Insmed Inc., according to Saini and Jefferies colleagues Jack McManus and Thomas Keane. Candidates for expulsion include Biogen Inc., Lululemon Athletica Inc., On Semiconductor Corp., GlobalFoundries Inc, CDW Corp. and Trade Desk Inc. A representative for Nasdaq declined to comment.
Walmart ranks No. 1 on the Transport Topics Top 100 list of the largest private carriers in North America.
Another closely watched stock is Michael Saylor’s Bitcoin treasury company Strategy Inc. Industry chatter from the likes of JPMorgan Chase & Co. has hinted that the company formerly known as MicroStrategy could lose its place in major indexes including the Nasdaq 100 due to a shrinking market capitalization and recent proposals that would exclude companies whose cryptocurrency holdings exceed 50% of total assets.
For now, Macquarie index specialist Edward Yoon doesn’t think this will happen. Based on the ranking date, Strategy sat in the middle among the eligible names in terms of market capitalization, “so a deletion is unlikely from a purely rules-based ranking perspective, unless the committee takes an active discretionary step to remove it, which we think is unlikely.”
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As for Walmart, its inclusion in the Nasdaq 100 appears inevitable at some point.
Macquarie’s Yoon said it is first in line should a current Nasdaq 100 member drop out due to a corporate event such as an acquisition. He cited the potential pending takeover offers for Electronic Arts Inc. and Warner Bros. Discovery Inc. Another opportunity would be if a smaller member of the index loses eligibility.
“A slot could also open if a current member’s index weight falls below 0.1% for two consecutive months,” Yoon said. “We expect it to be added as soon as an opening becomes available.”
The Bentonville, Ark.-based company’s decision to switch exchanges reflects an aim by the world’s largest retailer to place an emphasis on its prowess with technology, the sector most-often associated with Nasdaq. Walmart previously spent decades trading on the NYSE, during which founder Sam Walton famously performed a hula dance on Wall Street after reaching a profit goal.
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Walmart has posted healthy sales and share gains in recent years, as it attracts value-seeking consumers with low prices on everyday goods, and its market capitalization has swollen to more than $920 billion. At the same time, the company has been growing its digital business by offering and delivering more products at a faster speed. That effort has drawn higher-income shoppers and its U.S. e-commerce operation is expected to hit profitability this year. The advertising, marketplace and membership businesses are also growing.
More recently, Walmart has doubled down on artificial intelligence and is using the technology on various internal tasks from scheduling to supply chain. It’s also introducing AI tools for shoppers, teaming up with OpenAI.
The Nasdaq 100 is up about 20% this year as mega-cap technology shares lift the index. By comparison, the S&P 500 has gained 16%, while the Dow Jones Industrial Average has risen 14%.
