Each of the stocks dubbed the “Magnificent Seven” outperformed the gains achieved by the S&P 500 in 2023. Despite their share price increases, these stocks are not overpriced according to Wall Street analysts at JPMorgan.
The analysts stated, “There is a concern over the very strong outperformance of Mag-7, but we note that the group is currently trading less stretched than a few years ago, given earnings delivery.” Compared to the rest of the S&P 500, the analysts felt these seven stocks were undervalued.
Among the seven, three firms are positioned to deliver revenue growth for years, and Wall Street analysts beyond JPMorgan believe this trio is undervalued as well. These companies are semiconductor chipmaker Nvidia (NASDAQ: NVDA), digital advertising giant Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), and electric vehicle (EV) maker Tesla (NASDAQ: TSLA).
This trio provides diversity in your stock portfolio since they operate in different industries. Here’s a look at these three Magnificent Seven stocks, and why they’re worth buying now.
1. Nvidia
Nvidia is a compelling investment because it’s an industry leader in semiconductor chips for artificial intelligence. The company’s products are in such high demand, the company’s CEO, Jensen Huang, had to explain how Nvidia equitably distributes its AI chips.
Nvidia’s market dominance enabled the company to achieve record revenue of $22.1 billion in its fiscal fourth quarter, ended Jan. 28. This revenue was an astonishing 265% increase from the prior year.
The company expects its outsized sales growth to continue in Q1, forecasting around $24 billion in revenue. Contrast this with the prior year’s Q1 sales of $7.2 billion.
Nvidia also benefits from a tailwind of strong growth in the AI industry. Forecasts predict this market to rise from $306 billion in 2024 to $739 billion by 2030.
Moreover, Wall Street analysts are estimating an average share price target of $907 for Nvidia stock. This makes sense, given Nvidia is poised to see revenue growth for years to come in the expanding AI market.
2. Alphabet
Alphabet is a compelling stock among the Magnificent Seven for many reasons. Its Chrome browser and Google search engine possess dominant leadership positions in their respective markets.
The substantial consumer base for these products, in turn, attracts advertisers. This enables Alphabet’s Google to be the leader in digital advertising, with a 39% share of the market in 2023. Meta Platforms-owned Facebook was a distant second, with an 18% share.
Alphabet’s digital advertising dominance led to $86.3 billion in Q4 revenue, representing double-digit growth over the prior year’s $76 billion. But perhaps more importantly, this ad income funds the company’s efforts to expand beyond advertising, and its investments in AI.
For instance, the company built a successful cloud computing business in Google Cloud. This division hit $9.2 billion in Q4 revenue, up an impressive 26% year over year.
Now, Alphabet is beefing up its offerings with AI. The company is infusing the technology across many products, such as its search engine, Google Cloud, and its all-important advertising operations, which contributed $65.5 billion of the company’s $86.3 billion in Q4 sales.
Wall Street analysts are forecasting an average share price of $165 for Alphabet stock. All of these factors make Alphabet shares a buy.
3. Tesla
Several factors make Tesla a worthwhile Magnificent Seven stock to own. The stock is currently well off its 52-week high of $299.29 reached last summer, creating a buying opportunity.
Shares are down because the automaker noted 2024 would see lower vehicle volume growth compared to 2023. This year’s volume drop is due to Tesla preparing its factories for its next generation of automobiles, which are expected to start production in 2025.
This next generation of vehicles is a key reason to pick up Tesla shares. The company possesses a track record of success selling EVs. Tesla’s Model Y was the top-selling car in the world last year, the first time an electric vehicle captured this distinction.
Tesla’s popularity drove 2023 automotive sales to $82.4 billion, a 15% year-over-year jump. This double-digit revenue increase occurred despite the company cutting vehicle prices due to increased EV competition.
Tesla holds another reason to invest. The company isn’t focused solely on manufacturing vehicles like other automakers, such as Ford Motor Company. Tesla manages the entire scope of vehicle ownership. This includes automobile design and manufacturing; car sales typically left to dealerships, repairs and maintenance; and fueling through its global Supercharger network.
Consequently, Tesla is upending existing business models for gas-powered vehicles. This approach helped the company grow total 2023 revenue by 19% year over year to $96.8 billion.
Wall Street analysts are predicting an average share price target of $205 for Tesla stock. With the company promising new vehicles in the coming years, Tesla shares are a buy for the long-term investor.
Should you invest $1,000 in Alphabet right now?
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Robert Izquierdo has positions in Alphabet, Ford Motor Company, JPMorgan Chase, Meta Platforms, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, JPMorgan Chase, Meta Platforms, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
3 “Magnificent Seven” Stocks to Buy Now was originally published by The Motley Fool