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For over a decade, the Magnificent Seven - Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla - have dominated the tech scene. But with recent market fluctuations, investors wonder: are they still golden tickets?
While I have little doubt that each of these companies will continue to be market leaders in the foreseeable future, three of them have superior near-term outlooks.
In this article, I will share why I favor these three components of the elite group and what can change in the others to elevate them to Strong Buy status.
The Top Dogs
Again, I want to reiterate that although I favor three of these stocks, each of the Magnificent 7 are still exceptional companies and stocks. However, I believe these three have even better outlooks. The chart above, which shows the three-month relative performance actually displays quite clearly which are my favored stocks.
We can see that Nvidia, Meta Platforms and Amazon have the best performance and have outpaced the broad market. Not surprisingly, they are also the three stocks that boast Zacks Rank #1 (Strong Buy) ratings, reflecting upward trending earnings revisions.
Nvidia: The Undisputed King of AI
Nvidia's meteoric rise isn't just a hot stock; it's fueled by impressive earnings growth. While its premium valuation is justified to some extent, it isn't yet in bubble territory. Nvidia's future hinges on the continued momentum of the AI revolution, a field where they hold undisputed dominance.
This dominance is further solidified by their Zacks Rank #1 (Strong Buy) with upward trending earnings revisions. For investors seeking exposure to disruptive AI technology, Nvidia offers a compelling case.
Nvidia's stock is clearly being carried higher by momentum, but those calling for bubble valuations clearly aren't looking closely at the data. NVDA has a forward earnings multiple of 39.4x, which is below the industry average and below its 10-year median of 41.2x.
Amazon: Multifaceted Technology Enterprise
Amazon remains the undisputed king of online shopping, consistently delivering growth in its core business. But that's just one facet of this diversified giant.
Amazon Web Services (AWS) is a major revenue driver and enjoys a dominant market position in cloud computing. Additionally, their often-underestimated advertising business has exploded, significantly contributing to their overall profitability. The ad business now adds $60 billion annually to the top line.
With a Zacks Rank #1 (Strong Buy) and the second-highest projected EPS growth (28.1% annually) of the group, Amazon presents an attractive investment option for those seeking exposure to both established and innovative companies.
Meta Platforms: Always Underestimated
Defying expectations in 2023, Meta Platforms (formerly Facebook) emerged as the second-best performing stock in the S&P 500. This impressive feat underscores their underlying strength and potential.
Under CEO Mark Zuckerberg's leadership, the company has undergone a successful transformation, becoming a leaner, more efficient operation. This focus translates to sustained profitability, further bolstered by their product suite reaching a staggering 3.14 billion daily active users.
Meta Platforms also hold an early lead in the burgeoning VR/AR space, positioning them well for future growth. Their commitment to shareholder value through a new dividend payout program further sweetens the deal for investors seeking a balance between growth and stability.
Meta Platforms has EPS growth forecasts of 19.5% annually over the next 3-5 years.
Microsoft: On the Cusp
Microsoft is a close contender for the top dog group but is hindered by an above average historical valuation. But with a Zacks Rank #2 (Buy) rating, it may defy the high valuation and continue higher anyway.
One major advantage for Microsoft lies in its partnership with OpenAI, granting them a significant lead in the field of Artificial Intelligence. This partnership has the potential to revolutionize various aspects of Microsoft's products and services.
Microsoft is trading at a one-year forward earnings multiple of 34.8x, which is well above its 10-year median of 25.7x. It could be argued that its strong positioning in AI could have earned it a more premium multiple, but that is still unclear.
Something worth noting is that Microsoft currently has a very compelling technical trading setup, which may be a catalyst to push it higher. MSFT stock is on the verge of breaking out from this bull flag.
Bottom Line
The Magnificent Seven represents a diverse landscape of opportunities. Nvidia, Amazon, and Meta Platforms stand out for their exceptional growth potential and strong fundamentals. These top performers offer compelling investment options for those seeking exposure to the leading forces shaping the digital revolution.
However, carefully consider the challenges faced by the other companies that have been grouped in for the past year before making investment decisions. Remember, thorough research and understanding each company's strengths and weaknesses is crucial for success.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Nvidia, Meta Platforms, Amazon and Microsoft
For Immediate Release
Chicago, IL – March 13, 2024 – Today, Zacks Investment Ideas feature highlights Nvidia (NVDA - Free Report) , Meta Platforms (META - Free Report) , Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report)
The Magnificent 3: Unveiling the Top Tech Titans
For over a decade, the Magnificent Seven - Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla - have dominated the tech scene. But with recent market fluctuations, investors wonder: are they still golden tickets?
While I have little doubt that each of these companies will continue to be market leaders in the foreseeable future, three of them have superior near-term outlooks.
In this article, I will share why I favor these three components of the elite group and what can change in the others to elevate them to Strong Buy status.
The Top Dogs
Again, I want to reiterate that although I favor three of these stocks, each of the Magnificent 7 are still exceptional companies and stocks. However, I believe these three have even better outlooks. The chart above, which shows the three-month relative performance actually displays quite clearly which are my favored stocks.
We can see that Nvidia, Meta Platforms and Amazon have the best performance and have outpaced the broad market. Not surprisingly, they are also the three stocks that boast Zacks Rank #1 (Strong Buy) ratings, reflecting upward trending earnings revisions.
Nvidia: The Undisputed King of AI
Nvidia's meteoric rise isn't just a hot stock; it's fueled by impressive earnings growth. While its premium valuation is justified to some extent, it isn't yet in bubble territory. Nvidia's future hinges on the continued momentum of the AI revolution, a field where they hold undisputed dominance.
This dominance is further solidified by their Zacks Rank #1 (Strong Buy) with upward trending earnings revisions. For investors seeking exposure to disruptive AI technology, Nvidia offers a compelling case.
Nvidia's stock is clearly being carried higher by momentum, but those calling for bubble valuations clearly aren't looking closely at the data. NVDA has a forward earnings multiple of 39.4x, which is below the industry average and below its 10-year median of 41.2x.
Amazon: Multifaceted Technology Enterprise
Amazon remains the undisputed king of online shopping, consistently delivering growth in its core business. But that's just one facet of this diversified giant.
Amazon Web Services (AWS) is a major revenue driver and enjoys a dominant market position in cloud computing. Additionally, their often-underestimated advertising business has exploded, significantly contributing to their overall profitability. The ad business now adds $60 billion annually to the top line.
With a Zacks Rank #1 (Strong Buy) and the second-highest projected EPS growth (28.1% annually) of the group, Amazon presents an attractive investment option for those seeking exposure to both established and innovative companies.
Meta Platforms: Always Underestimated
Defying expectations in 2023, Meta Platforms (formerly Facebook) emerged as the second-best performing stock in the S&P 500. This impressive feat underscores their underlying strength and potential.
Under CEO Mark Zuckerberg's leadership, the company has undergone a successful transformation, becoming a leaner, more efficient operation. This focus translates to sustained profitability, further bolstered by their product suite reaching a staggering 3.14 billion daily active users.
Meta Platforms also hold an early lead in the burgeoning VR/AR space, positioning them well for future growth. Their commitment to shareholder value through a new dividend payout program further sweetens the deal for investors seeking a balance between growth and stability.
Meta Platforms has EPS growth forecasts of 19.5% annually over the next 3-5 years.
Microsoft: On the Cusp
Microsoft is a close contender for the top dog group but is hindered by an above average historical valuation. But with a Zacks Rank #2 (Buy) rating, it may defy the high valuation and continue higher anyway.
One major advantage for Microsoft lies in its partnership with OpenAI, granting them a significant lead in the field of Artificial Intelligence. This partnership has the potential to revolutionize various aspects of Microsoft's products and services.
Microsoft is trading at a one-year forward earnings multiple of 34.8x, which is well above its 10-year median of 25.7x. It could be argued that its strong positioning in AI could have earned it a more premium multiple, but that is still unclear.
Something worth noting is that Microsoft currently has a very compelling technical trading setup, which may be a catalyst to push it higher. MSFT stock is on the verge of breaking out from this bull flag.
Bottom Line
The Magnificent Seven represents a diverse landscape of opportunities. Nvidia, Amazon, and Meta Platforms stand out for their exceptional growth potential and strong fundamentals. These top performers offer compelling investment options for those seeking exposure to the leading forces shaping the digital revolution.
However, carefully consider the challenges faced by the other companies that have been grouped in for the past year before making investment decisions. Remember, thorough research and understanding each company's strengths and weaknesses is crucial for success.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.