The “Magnificent Seven,” a group of leading mega-cap tech giants, have become key drivers of major stock market indexes such as the S&P 500 and Nasdaq 100.
This cohort, identified in 2023 for their stellar market performance, comprises of Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), Nvidia (NASDAQ: NVDA), Alphabet (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), Meta (NASDAQ: META), and Tesla (NASDAQ: TSLA)
These companies are not only renowned for their solid operations and historical stock performance but are also strategically positioned to leverage advancements in artificial intelligence (AI) and other cutting-edge technologies
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Their collective influence is substantial, representing a significant portion of the S&P 500 and Nasdaq 100, thus playing a crucial role in the movement of these indexes.
The cumulative market capitalization of these stocks was $16 trillion as of June 26, 2024. Despite some concerns about overvaluation, certain stocks in this group still present solid investment opportunities.
This prompted Finbold to look into the fundamentals and analyst ratings of Magnificent Seven stocks to determine which stocks show potential buy opportunities.
Amazon (AMZN)
Amazon continues to be a compelling stock for both investors and traders due to its robust financial performance, strategic investments, and market leadership.
In Q1 2024, Amazon reported a remarkable 216% year-over-year increase in earnings per share (EPS) to $0.98, with sales growing by 13% to $143.3 billion. Amazon Web Services (AWS), a critical profit driver, saw a 17% revenue increase to $25 billion.
Amazon’s strategic investments in AI and cloud services further bolster its growth prospects. The company’s $4 billion investment in AI startup Anthropic and the development of generative AI services through AWS position it at the forefront of technological innovation.
Additionally, Amazon recently joined the exclusive club of U.S. companies with a market value exceeding $2 trillion, underscoring its market dominance and investor confidence. The company’s share price has surged over 26% since being included in the Dow Jones Industrial Average in February 2023.
Amazon’s retail growth, particularly in North America and international segments, significantly boosted overall earnings, with revenue up 13% year over year in Q1 2024. The introduction of ads on Prime Video has also spurred revenue growth, with the advertising services segment reporting a 25% increase.
Amazon Web Services remains the largest cloud services provider globally, with a 31% market share. The company’s continuous investment in AI and custom-designed chips for data centers strengthens its competitive edge
Based on 42 Wall Street analysts’ projections, Amazon’s stock is expected to rise further, with an average 12-month price target of $221.68, representing a 13.94% increase from its last price of $194.56. The high forecast is $246.00, and the low is $200.00, with a consensus rating of “Strong Buy.”
Despite its impressive growth, Amazon’s valuation metrics indicate it remains a bargain. With a price-to-sales ratio of about 3, a forward P/E ratio of 49.06, and a PEG ratio of 1.50, Amazon is well-positioned for continued growth. Amazon’s resilience, strategic investments, and market leadership make it a compelling buy for both investors and traders.
Microsoft (MSFT)
Microsoft continues to be a top pick for investors and traders due to its strategic integration of AI across its product suite, robust financial performance, strong market position, and attractive valuation metrics.
The company’s partnership with OpenAI has significantly enhanced its cloud and software offerings, particularly with the embedding of AI into the Office 365 suite and the launch of AI-powered tools like Microsoft 365 Copilot.
Microsoft’s Azure cloud platform, which holds a 25% market share, is a major contributor to the company’s expansion in AI and cloud services. The recent acquisition of Activision Blizzard has diversified Microsoft’s revenue streams, adding popular game franchises to its portfolio.
Despite fierce competition with tech giants like Apple and Nvidia for the title of the world’s most valuable company, Microsoft has recently reclaimed the top spot. This resurgence is attributed to its strong fundamentals and growth prospects.
With a 70% gross margin and forecasted earnings per share of $11.77, any incremental benefits from AI integration are likely to be viewed positively by investors.
From a valuation perspective, Microsoft is compelling. The company trades at a forward P/E ratio of 29.16 and a PEG ratio of 2.71, indicating that its stock is reasonably priced relative to its growth potential.
Moreover, Microsoft’s price-to-sales ratio of 12.41 and enterprise value to EBITDA (EV/EBITDA) ratio of 24.54 reflect its strong earnings potential and efficient use of capital.
Analysts are bullish on Microsoft’s future prospects. Based on 35 Wall Street analysts, the average 12-month price target for Microsoft is $500.71, representing a 12.03% increase from the last price of $446.95. The high forecast is $600.00, and the low is $450.00, with a consensus rating of “Strong Buy.”
With their strong financial performance, strategic AI investments, and robust market positions, both Amazon and Microsoft are compelling buys for July 2024.
However, investors should remain cautious and conduct thorough research due to the inherent volatility and risks of stock markets.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
