The Magnificent 7 stocks have led market indices higher in recent years. These few stocks have created generational wealth for some of their long-term investors. Despite the high gains, many of these stocks still have growth opportunities and can continue rewarding investors in the future. The stocks we will be discussing are stocks poised to join the Magnificent 7.
However, some investors prefer to find stocks that can become the next Magnificent 7. Nvidia (NASDAQ:NVDA) escaped many investors’ radars just a few years ago. The stock has gained more than 1,000% within the past five years, but which stocks can follow suit?
While it’s hard to predict which stocks can generate that type of gain in five years, it’s easier to take a longer perspective. Some stocks can become winners within a short amount of time and emulate the Magnificent 7. These are some of the new elite stocks to consider.
Supermicro (NASDAQ:SMCI) has tailwinds similar to Nvidia’s as the artificial intelligence industry heats up. The company produces high-performance server and storage solutions that enable AI tools to operate. Artificial intelligence requires servers that can handle heavy workloads, and Supermicro has become one of the leaders in the industry.
Supermicro is a long-term Nvidia partner that recently received priority access to new AI chips. As Nvidia grows, Supermicro will grow along with it. The company’s stock price has managed to outperform Nvidia over the past five years with a 1,559% gain. Year-to-date gains are similar between the companies.
Supermicro closed out Fiscal 2023 with 37% year-over-year revenue growth. During that year, revenue increased from $5.2 billion to $7.12 billion. The company expects to generate $9.5 billion to $10.5 billion in sales in Fiscal 2024. The midpoint represents 40.5% year-over-year revenue growth.
Supermicro is a small company compared to the Magnificent 7. The firm only has a $14 billion market cap and a 24 P/E ratio. Unlike other high-flying growth stocks, Supermicro is profitable.
Zscaler (NASDAQ:ZS) is a riskier stock since the company relies on high revenue growth to justify its current unprofitability. The cloud security firm has thousands of corporate customers, including 40% of the Fortune 500 companies.
These companies have deep pockets and are unlikely to make cuts to their cybersecurity spending. A well-coordinated hack can decimate a company’s operations and ruin customer trust.
Zscaler helps to protect business owners from facing those scenarios and high legal bills related to cyberattacks. There are a few additional hidden costs of cyberattacks that make security essential and profitable for many companies.
The company’s top line remains strong. Zscaler reported 40% year-over-year revenue growth in the first quarter of fiscal 2024. The company’s GAAP loss improved. This quarter’s GAAP loss of $33.5 million is less than half of the $68.2 million GAAP loss reported in the same quarter last year. Calculated billings grew by 34% year-over-year which implies that high revenue growth is here to stay.
Crowdstrike (NASDAQ:CRWD) is another cybersecurity leader that benefits from the prevalence of cyberattacks. The company’s security software and protocols help businesses keep their sensitive data safe.
Shares have more than doubled year-over-year and are up by 266% over the past five years. These percentages look like the ones you would expect to find from a Magnificent 7 stock. The good times may keep on coming as the company recently became profitable and continues to report high revenue growth.
In the third quarter of fiscal 2024, Crowdstrike achieved 35% year-over-year revenue growth. GAAP net income came in at $3.2 million compared to a net loss of $56.4 million in the same quarter last year. Annual recurring revenue reached $3.15 billion at the end of October 2023.
Crowdstrike offers a vital service for business owners who want to stay safe. It takes a lot of time to switch to a new cybersecurity software. Crowdstrike can leverage this dynamic and periodically raise its prices to generate more revenue. Demand is strong as it is and can help the stock continue its ascent.