Big tech companies like Apple, Microsoft, Nvidia (NASDAQ:NVDA), Alphabet, Amazon (NASDAQ:AMZN), Meta Platforms, and Tesla are part of the Magnificent Seven. These are some of the largest companies in the world and are part of rapidly expanding addressable markets such as public cloud, artificial intelligence (AI), digital advertising, enterprise software, and more.
Around 455 companies in the S&P 500 index reported their quarterly earnings last month, of which 79.7% exceeded estimates. The average earnings per share growth for these companies stood at 13.3%. However, if we exclude the companies in the Magnificent Seven, earnings growth for the rest of the S&P 500 companies was much lower at 8.7%.
Its quite evident that the Magnificent Seven stocks are driving the majority of stock market gains in 2024. Here are two quality Magnificent Seven stocks that continue to trade at a compelling valuation, and you can buy them right now.
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Nvidia stock
Valued at US$2.9 trillion by market cap, Nvidia is the third-largest company on the S&P 500 and has risen over 25,000% in the last 10 years. However, it trades 13% below all-time highs, allowing you to buy the dip and gain exposure to quality stocks at a discount.
Nvidia designs data centre chips to process AI workloads. It has experienced robust demand for its chips as companies such as Microsoft, Meta, and Alphabet invest heavily in AI to gain a first-mover advantage.
Despite its massive size, Nvidia reported US$26 billion in sales in its fiscal first quarter (Q1) (ended in April), up 262% year over year, while adjusted earnings per share rose by 461% to US$6.12. Analysts forecast the market bellwether to report revenue of US$24.6 billion and earnings of US$5.59 per share in the April quarter. Nvidia’s data centre sales were the key driver of the top line, rising 427% to US$24.6 billion.
NVDA stock is priced at 43.4 times forward earnings, which is lofty. However, it is also forecast to expand adjusted earnings by 46% annually in the next five years.
Amazon stock
Valued at US$1.79 billion by market cap, Amazon has created massive wealth for shareholders. The e-commerce giant went public in 1997 with sales of US$148 million. It ended 2023 with sales of a whopping US$575 billion. Moreover, Wall Street expects the tech giant to increase sales by 10.6% annually between 2023 and 2026.
Amazon is a major player in several growth markets. For instance, it is the largest public cloud infrastructure company with a 31% market share and dominates the e-commerce segment.
A higher purchase intent among shoppers has made Amazon the third-largest digital advertising platform in the world. Its digital ad sales grew by 20% year over year to US$12.8 billion, and the high-margin business should improve its bottom line going forward.
Amazon’s focus on cost-cutting has meant its free cash flow has surpassed US$60 billion in the last 12 months, up from US$19.88 billion in 2019.
Priced at 36 times forward earnings, Amazon’s earnings are forecast to expand by 30.5% annually in the next five years. Analysts remain bullish and expect AMZN stock to surge 28% in the next 12 months.
