CNBC personality Jim Cramer is credited with coming up with the popular FANG acronym to describe megacap tech growth stocks Facebook, Amazon, Netflix Inc. (ticker: NFLX) and Google back in 2013. Cramer expanded FANG to FAANG in 2017 when he added Apple to the mix. However, while all the original FAANG stocks continue to perform well, several other high-profile, technology-centric 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 the “Magnificent 7” to describe these stocks, borrowing from the 1960’s 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 7:
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 AI innovation, including a $13 billion investment in ChatGPT maker OpenAI. Microsoft has integrated ChatGPT into its Bing search engine and combined all its AI chatbots into a single AI experience called Microsoft Copilot. Microsoft has generated a 1,159% total return, which includes dividends, over the past decade. The average analyst price target for the stock is $478.01, suggesting 12.4% upside from its May 20 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. Two of Amazon’s biggest strategic shifts have been its acquisition of Whole Foods and its launch of the Amazon Prime subscription service, which includes Prime Video streaming and fast, free delivery of millions of products. Amazon shares are up 1,119% in the past decade, and the average analyst price target of $226.66 suggests 23.5% 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 March 2024, Meta had about 3.2 billion total daily active people across all its platforms, and the company’s massive audience makes it one of the world’s leading online advertising businesses. Facebook shifted its focus from social media to building the metaverse in 2021, changing its corporate name to Meta Platforms. Meta shares are up 701% in the past 10 years. The average analyst price target for the stock is $512.99, suggesting 9.4% upside.
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Apple Inc. (AAPL)
Apple is a leading consumer electronics maker, generating the majority of its revenue from 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 900% total return in the past decade. Its average analyst price target is $202.26, suggesting 5.9% 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 about a 90% share of worldwide search, according to StatCounter. Google’s Bard AI chatbot and Gemini AI model are also top competitors to ChatGPT. Alphabet has generated a 555% return in the past decade. The average analyst price target for GOOGL stock is $191.49, suggesting 8.2% 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 7 has significantly outperformed the S&P 500’s return in the past decade, Nvidia’s 21,739% gain is more than 17 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 $1,052.63, suggesting 11.1% upside.
Tesla Inc. (TSLA)
Tesla designs and produces electric vehicles, advanced driver assistance technology 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 bears argue Tesla is absurdly overvalued for an auto stock, trading at about 70 times forward earnings. Tesla shares are up 1,244% in the past decade. TSLA stock’s average analyst price target is $178.97, suggesting 2.3% upside.
Takeaway
Past performance is no guarantee of future returns, and several of the Magnificent 7 stocks have somewhat lofty valuations based on fundamental metrics such as forward earnings multiples and price-to-sales ratios. However, each of the seven stocks has far outperformed the S&P 500 in the past decade, 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 at a combined market capitalization of nearly $14 trillion, the Magnificent 7 stocks 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
Update 05/21/24: This story was previously published at an earlier date and has been updated with new information.
