3 Fantastic Stocks That Could Join the S&P 500 by 2025

Have you ever wondered why some stocks are in S&P 500 and others not? ok it turns out exist a very specific one set of criteria that must be met for a stock to enter the index, which will be disclosed below.

But now, three Fool.com contributors are going to name their top stocks that could be added to the index by 2025. Let’s dive right in.

Image source: Getty Images.

Palantir meets all the criteria for inclusion in the S&P 500

Jake Lerch (Palantir Technologies): My pick as a stock that could enter the S&P 500 by next year is Palantir TECHNOLOGY (PLTR -1.80%). Palantir is the maker of an artificial intelligence-based platform that helps organizations make sense of complex data sets, and the company’s stock is hot.

So far this year, Palantir shares are up a remarkable 80%. Its market cap is now $68 billion, making AI stock the 279th largest public company in America by market capitalization. However, as of this writing, Palantir is not yet a member of the S&P 500.

So what gives?

It’s a good one question because Palantir checks all the necessary boxes for inclusion in the S&P 500:

• A US company
• Market capitalization of at least $18 billion
• The stock is very liquid
• The public float represents at least 50% of the total shares in circulation
• Positive earnings in the most recent quarter and positive total earnings in the most recent four quarters

First offPalantir is based in the US and has a market cap of nearly $70 billion — check it out.

Second, Palantir stock is very liquid; its public float is well over 50% of its outstanding shares available.

Finally, we reach profitability. profitability, in all likelihood, this is why Palantir is not in the S&P 500. While the company reported positive earnings in each of last six quarters, them they were tiny profits.

PLTR Diluted EPS Data (Quarterly) by YCharts

As you can see above, Palantir has had quarterly losses right through the end of 2022. Because of this, the committee likely delayed putting Palantir into the S&P 500 — waiting to see several quarters of positive earnings before giving it to Palantir.

However, another quarter of positive earnings could be enough to prompt the committee to add Palantir to the index by 2025. And that’s it exact What I think so it will happen.

Inclusion in the S&P 500 could help turn this company into the next big advertising action

Will Healy (Trade Office): Mega-head tech stocks Alphabet (GOOGL -2.69%) (GOOG -2.78%) and Meta platforms (META -1.31%) they built their fortunes on digital advertising. These companies generate tens of billions in revenue each quarter, helping companies of all sizes reach their desired audiences, and their market power makes them pillars of the S&P 500.

Amid this industry’s influence, the next advertising stock to enter the S&P 500 could be Trade office (TTD -2.58%). Its demand-driven platform enables agencies and businesses to manage digital advertising campaigns, serving ads at the times and places they believe can generate the most returns. Additionally, with Kokai’s AI tool, users can further refine ad timing and placement to get more value.

Because of its capabilities, it has become a stock with a market capitalization of $50 billion, well above the minimum market cap required to enter the S&P 500. From that point on, the financials will likely contribute to further growth of this stock.

Revenue for the first half of 2024 was just under $1.1 billion, a 27% increase over the same period last year. The company also recovered from a decline in earnings that it faced in 2022. With that, its net income was $117 million in the first six months of 2024, up 176% compared to with the previous year’s levels.

Against the backdrop of these rapidly growing profits, its price-to-earnings (P/E) ratio of 205 is probably not representative of its valuation, but its price-to-sales (P/S) ratio of 24 makes it expensive. However, analysts are forecasting revenue growth of 26% this year and 20% in 2025, meaning revenue will continue to put downward pressure on sales multiples.

Finally, investors should remember what indexing means — a place in the portfolio of every investor who invests in the S&P 500 through index funds. This growing influence should further support the stock as more advertisers turn to its platform.

Coinbase would give the S&P 500 exposure to the potential upside of cryptocurrency.

Justin Pope (Coinbase): Whether the S&P 500 will seek innovation and add AI technology companies such as CrowdStrike and Super Micro Computer in the index, it makes perfect sense to add Coinbase (CURRENCY -6.26%)also. Cryptocurrencies are still hotly debated among investors, but the asset class is forcing its way into the conversation. According to research by The Motley Fool, about a quarter of investors are “very likely” to buy at least one form of cryptocurrency.

The case for Coinbase is simple. It is a publicly traded American company, making it perhaps the safest exchange and crypto-finance company after fraud and controversy tainted or destroyed private and foreign competitors such as Binance and FTX.

Still, it easily meets the criteria for inclusion in the S&P 500; its current market capitalization of $42 billion is hitting its nadir. Additionally, it is comfortably GAAP profitable, with nearly $1.4 billion in net income over the past four quarters.

Most importantly, it’s a fantastic deal. The Coinbase exchange is its core business, but its ambitions extend into the crypto economy, including financial products like bank and payment cards that allow users to spend their cryptocurrency as dollars. Cryptocurrency can be cyclical, but Coinbase has proven it can withstand downturns. The company is also in a great financial position, with more than $8 billion in cash on its balance sheet, nearly a fifth of its stock value.

Cryptocurrencies must continue to be adopted by society and investors in order for Coinbase’s business to grow in the long term. However, there is no better stock for exposure to crypto’s growth potential. Adding Coinbase to the S&P 500 would reflect a forward-looking investment strategy and help boost the index in the coming years if the cryptocurrency continues to gain momentum.