CNBC personality Jim Cramer is credited with coming up with the popular FANG acronym to describe mega-cap tech growth stocks Facebook, Amazon, Netflix and Google back in 2013. Cramer expanded FANG to FAANG in 2017 when he added Apple to the mix.
While all the original FAANG stocks continue to perform well, other high-profile, tech-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 1960s 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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Here’s what every investor should know about the Magnificent 7.
Overview of Magnificent 7 Stocks
Microsoft Corp. (ticker: 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 copilots into a single AI experience called Microsoft Copilot. The company has generated a 940% total return for investors over the past decade. The average analyst price target for the stock is $496.67, suggesting 21.6% upside over its Sept. 5 close.
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 927% in the past decade, and the average analyst price target of $218.35 suggests 22.7% 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 June 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 570% in the past 10 years. The average analyst price target for the stock is $564.69, suggesting 9.3% upside.
Apple Inc. (AAPL)
Apple is a leading consumer electronics maker, generating revenue largely from its iPhone smartphones. In addition, Apple sells Mac 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 912% total return in the past decade. Its average analyst price target is $240.20, suggesting 8% 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 91% share of worldwide search, according to GlobalStats. Google’s Gemini AI chatbot and other AI models are also top competitors to ChatGPT. Alphabet has generated a 426% return in the past decade. The average analyst price target for GOOGL stock is $202.79, suggesting 28.9% upside.
Nvidia Corp. (NVDA)
Nvidia designs and sells high-end processors used in personal computers, tablets, smartphones, workstations and servers. While each of the Magnificent 7 has significantly outperformed the S&P 500’s return in the past decade, Nvidia’s roughly 22,235% gain sets it apart from the other six stocks. Online gaming and cloud data center demand have been two growth drivers for Nvidia’s processors, but its AI chip market dominance is its biggest selling point in 2024. The average analyst price target for NVDA stock is $144.84, suggesting 35.1% 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 controversial CEO Elon Musk has built a cult-like following of investors and admirers. Tesla bulls point out the company’s disruptive potential, AI technology opportunities and lack of large-scale U.S. EV competition. Bears argue Tesla is absurdly overvalued for an auto stock, trading at about 73 times forward earnings. Tesla shares are up 1,144% in the past decade. TSLA stock’s average analyst price target is $208.92, suggesting 9.2% downside.
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 outperformed the S&P 500 by a huge margin 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 about $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 09/06/24: This story was published at an earlier date and has been updated with new information.
