CNBC personality Jim Cramer is credited with coming up with the popular FANG acronym to describe megacap tech growth stocks Facebook, Amazon.com Inc. (ticker: AMZN), Netflix Inc. (NFLX) and Google way back in 2013. Since then, Facebook changed its name to Meta Platforms Inc. (META), and Google restructured and changed its corporate name to Alphabet Inc. (GOOG, GOOGL). Cramer expanded FANG to FAANG in 2017 when he added Apple Inc. (AAPL) to the mix.
While all the original FAANG stocks have continued to perform well, several other high-profile, technology-centric megacap stocks have emerged in recent years to lead the market to new highs. In 2023, Bank of America analyst Michael Hartnett began using the phrase “Magnificent Seven” to describe these stocks, borrowing from the 1960s ensemble Western movie of the same name. In addition to these stocks being some of the most valuable companies in the entire stock market, they are all focused largely on secular technology growth trends such as artificial intelligence, cloud computing, online gaming and cutting-edge hardware and software.
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FAANG may no longer cut it when it comes to capturing some of the largest, most influential tech companies in the market. MAMA ANT may be the new acronym taking Wall Street by storm. Here’s an overview of what every investor should know about the Magnificent Seven.
Detailed Overview of Magnificent 7 Stocks
Microsoft Corp. (MSFT)
Microsoft is the world’s largest software company and is known for its Windows operating system, Azure cloud services, LinkedIn social media platform, Office professional software suite and Xbox gaming brand. Microsoft is a market leader in professional software, and it has grabbed headlines in the past year thanks to its AI innovation, including its large investments in ChatGPT maker OpenAI. Microsoft launched its Microsoft Copilot AI experience in September 2023. The stock has generated a 1,193% total return for investors over the past decade. The average analyst price target for Microsoft is $456.81, suggesting 10% upside over its March 13 closing price.
Amazon.com Inc. (AMZN)
Amazon was founded as an online bookstore back in 1994, but the company has expanded its business over the past three decades to become one of the largest online retailers, public cloud services providers and digital entertainment platforms in the world. Amazon is known for its Amazon Prime subscription service, which includes Prime Video streaming and fast, free delivery of millions of products. Amazon Web Services is also a market leader in public cloud services. Amazon shares are up 850% in the past decade, and the average analyst price target of $206.20 suggests 16.8% additional upside ahead.
Meta Platforms Inc. (META)
Meta Platforms owns and operates some of the world’s largest social media and messaging platforms, including Facebook, WhatsApp, Messenger and Instagram. As of the end of 2023, Meta had nearly 3.2 billion total daily active people across all its platforms, and the company’s massive audience makes it one of the leading online advertising businesses in the world. Facebook shifted its focus to building the so-called metaverse in 2021, changing its corporate name to Meta Platforms. Meta shares are up 620% in the past 10 years. The average analyst price target for the stock is $504.54, suggesting 1.8% upside.
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Apple Inc. (AAPL)
Apple is a leading consumer electronics maker, generating revenue largely from its iPhone smartphones. In addition, Apple sells Macintosh notebook and desktop computers, iPad tablets, Apple Watches and other wearable devices. Its services segment includes the mobile App Store, iCloud storage, advertising and other businesses. While iPhone sales growth has slowed, high-margin services segment sales growth has helped pick up the slack. Apple’s massive profits have also funded aggressive share buybacks, which support the stock price. Apple shares have generated a total return of 925% in the past decade. Its average analyst price target is $201.28, suggesting 17.6% upside.
Alphabet is a global technology company and the parent of search engine Google, video streaming platform YouTube, autonomous vehicle company Waymo, cybersecurity company Mandiant and many other tech subsidiaries. Its top businesses include online and mobile search, online advertising, cloud services and app sales. Alphabet dominates the online search market with more than 90% share of worldwide search, according to GlobalStats. Google’s Gemini AI model is also a top competitor to ChatGPT. Alphabet’s stock has generated a 370% total return in the past decade. The average analyst price target for GOOGL stock is $162.16, suggesting 16% upside.
Nvidia Corp. (NVDA)
Nvidia designs and sells high-end graphics and mobile processors used in personal computers, tablets, smartphones, workstations and other applications. While each of the Magnificent Seven has significantly outperformed the S&P 500’s return in the past decade, Nvidia’s roughly 21,540% gain is about 18 times the total return of any of the other six stocks. Online gaming and cryptocurrency mining have been two growth drivers for Nvidia’s processors, but its dominance in the AI chip market is its biggest selling point in 2024. The average analyst price target for NVDA stock is $862.50, suggesting 5.1% downside.
Tesla Inc. (TSLA)
Tesla designs and produces electric vehicles and renewable energy products. Tesla is the U.S. market leader in EV sales, and its charismatic and controversial CEO Elon Musk has built a cult-like following of investors and admirers. Tesla bulls point out the company’s disruptive potential and lack of large-scale U.S. EV competition, while Tesla bears argue the company is absurdly overvalued for an auto stock, trading at 54 times forward earnings. Tesla shares are up 969% in the past decade. TSLA stock’s average analyst price target is $202.62, suggesting 19.6% upside.
Final Thoughts on Magnificent 7 Stocks
Past performance is no guarantee of future returns, and several of the Magnificent Seven stocks have somewhat lofty valuations based on fundamental metrics such as forward earnings multiples and price-to-sales ratios. Each of the seven stocks has outperformed the S&P 500 by more than 100% in the past decade, however, and their exposure to high-growth technologies such as high-end software and hardware, cloud computing and artificial intelligence position them well to continue to lead their respective markets over time. Even after all that success, the Magnificent Seven may still have room to run.
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Magnificent 7 Stocks: What Are They and How They Dominate the Market originally appeared on usnews.com
