Invesco QQQ ETF: A Moderate Buy with 12.9% Upside Potential

The Invesco QQQ ETF has declined 1.25% over the past five days but is up 11% year-to-date. TipRanks' analyst consensus rates QQQ as a Moderate Buy with an average price target of $644.06, implying a 12.9% upside potential. The ETF's Smart Score is seven, indicating that it is likely to perform in line with the market.

The Invesco QQQ ETF (QQQ) saw a notable performance in July, with an NAV total return of 2.39%, outperforming the S&P 500 Index, which returned 2.24% [1]. This relative outperformance was driven by QQQ's underweight exposure to the Health Care sector and overweight exposure to the Technology sector. The Technology and Utilities sectors were the biggest contributors to QQQ's absolute performance.

QQQ experienced an outflow of approximately $566 million during the month, but it ended July with $361.14 billion in assets under management (AUM), remaining the 5th largest ETF in the US [1]. The shares of QQQ declined by 9.91% month-over-month, while the notional value traded decreased by 6.40% month-over-month.

The month was marked by significant market developments, including the extension of the reciprocal tariff pause until August 1, and the announcement of trade deals with Japan, Korea, and the European Union (EU). The Japan deal, for instance, reduced the baseline reciprocal tariff to 15% from 27.5%, and included a commitment to invest $550 billion in the US. The EU trade agreement also reduced reciprocal tariffs to 15% and included commitments for energy and investment purchases [1].

The Federal Reserve held its target rate steady at 4.25% – 4.50% at the end of the month, with two governors dissenting on the rate decision. The Fed noted that inflation remains "somewhat elevated" but is well-positioned to respond to potential economic developments [1].

From a sector perspective, six out of the ten sectors in QQQ finished in positive territory for July. Real estate was the best performing sector, with CoStar Group advancing by 18.40%. The Technology sector averaged a 61.26% weighting within QQQ and saw a total return of 2.90%, outperforming its average weight in the S&P 500 of 38.67% [1].

The ETF's performance was negatively impacted by the Consumer Discretionary and Telecommunications sectors, which averaged weightings of 18.97% and 4.16% in QQQ, respectively, and declined by 2.06% and 4.21% for the month [1].

Over the past five days, QQQ has declined by 1.25%, but it is up 11% year-to-date. TipRanks' analyst consensus rates QQQ as a Moderate Buy with an average price target of $644.06, implying a 12.9% upside potential. The ETF's Smart Score is seven, indicating that it is likely to perform in line with the market [2].

References:
[1] https://www.invesco.com/qqq-etf/en/etf-insights/qqq-monthly-review.html
[2] https://www.tiprack.com/