The Magnificent Seven, a group of mega-cap tech giants, have become the main drivers of major stock market indexes like the S&P 500 and Nasdaq 100.
This group, identified in 2023 for their stellar market performance, consists 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 known for their solid operations and historical stock performance, but are also strategically positioned to take advantage of advances in artificial intelligence (AI) and other cutting-edge technologies.
Their collective influence is substantial, representing a significant portion of the S&P 500 and Nasdaq 100, thus playing a decisive role in the movement of these indices.
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 at Magnificent Seven’s stock fundamentals and analyst ratings to determine which stocks indicate potential buying opportunities.
Amazon (AMZN)
Amazon continues to be a compelling stock for both investors and retailers due to its strong financial performance, strategic investments and market leadership.
In the first quarter of 2024, Amazon reported a remarkable 216% year-over-year increase in earnings per share (EPS) to $0.98, with sales rising 13% to $143.3 billion. Amazon Web Services (AWS), a critical profit driver, saw a 17% increase in revenue to $25 billion.
Amazon’s strategic investments in AI and cloud services further strengthen 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 US companies with a market value exceeding $2 trillion, underscoring its market dominance and investor confidence. The company’s stock price has risen over 26% since it was included in the Dow Jones Industrial Average in February 2023.
Growth in Amazon’s retail sales, particularly in North America and international segments, significantly boosted overall earnings, with revenue up 13% year-on-year in Q1 2024. The introduction of Prime Video advertising has also boosted revenue growth, with the advertising services segment reporting a 25% increase.
Amazon Web Services remains the largest provider of cloud services globally, with a market share of 31%. The company’s continued investment in AI and custom-designed chips for data centers strengthens its competitive edge
Based on the forecasts of 42 Wall Street analysts, Amazon shares are expected to rise further, with a 12-month average price target of $221.68, representing a 13.94% increase from the last price of 194.56 dollars. The forecast high is $246.00 and the low is $200.00, with a consensus rating of “Strong Buy”.
Despite its impressive growth, Amazon’s valuation metrics show it remains a bargain. With a price-to-sales ratio of around 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 retailers.
Microsoft (MSFT)
Microsoft continues to be the top choice for investors and marketers due to its strategic integration of AI into its product suite, strong 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 introduction of AI into the Office 365 suite and the release of AI-powered tools like Microsoft 365 Copilot.
Microsoft’s Azure cloud platform, which holds 25% of the market, is a major contributor to the company’s expansion into 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 revival is attributed to its strong fundamentals and growth prospects.
With a gross margin of 70% and projected earnings per share of $11.77, any additional benefits from AI integration are likely to be viewed positively by investors.
From a valuation point of view, 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.
Additionally, Microsoft’s price-to-sales ratio of 12.41 and enterprise value to EBITDA (EV/EBITDA) of 24.54 reflect its strong earnings potential and efficient use of capital.
Analysts are happy with 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 forecast high 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 strong market positions, 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 the stock markets.
Disclaimer: The content on this site should not be considered investment advice. The investment is speculative. When you invest, your capital is at risk.