The Magnificent 7 stocks were one of the biggest stories in markets in 2023. They were responsible for an outsized share of market returns, proving the incredible value of tech to the overall economy. One could even make the argument that their performance prevented a recession.
2024 has mainly started the same for the Magnificent 7, except Tesla (NASDAQ:TSLA). It has lost 40% of its value since the beginning of the year. The electric vehicle market is facing multiple issues leading to a free fall. That free fall has prompted many investors to wonder if Tesla continues to deserve its position among the Magnificent 7.
If that does occur, these three stocks entirely deserve its place.
Eli Lilly (LLY)
Eli Lilly (NYSE:LLY) Is a clear contender in the conversation about stocks that can unseat Tesla from the Magnificent 7. The Wall Street Journal recently noted that Eli Lilly’s market capitalization exceeded Tesla’s. Today, Eli Lily’s market capitalization is $718 billion, making it the 9th most valuable publicly traded firm globally. Tesla is two places behind Eli Lilly, with a market capitalization of $600 billion.
Eli Lilly has been propelled much higher due to FDA approval of Zepbound as a weight loss treatment. The drug shares the same active ingredient with Mounjaro, a diabetes treatment. Analysts believe those two drugs could account for more than $40 billion in annual sales by the decade’s end. Analysts believe those drugs could contribute more than $11 billion in revenues in 2024.
That suggests that LLY stock has plenty of room to run higher. Additionally, the active ingredient in those leading treatments has potential efficacy in treating other diseases. That suggests an even greater upside, making Eli Lilly a strong contender to supplant Tesla.
Taiwan Semiconductor Manufacturing (TSM)
Let’s do some quick math regarding Taiwan Semiconductor Manufacturing (NYSE:TSM) and its stock. Specifically, let’s look at the potential effects of what could happen to its market capitalization in 2024 and what that means.
The company is bullish about 2024 and anticipates that sales could rise by 20% or more. That’s a powerful signal for the broader semiconductor industry that it serves as the world’s largest foundry. That bullish call means that Taiwan Semiconductor Manufacturing has the potential to rise to $160.
At $160, TSM stock would increase in price by more than 24%, leading to a concurrent market capitalization of 24%. Thus, Taiwan Semiconductor Manufacturing’s market cap would be roughly $830 billion.
That would be roughly $100 billion higher than ever valued. By comparison, Tesla was valued at more than $1.2 trillion in late 2021. Both firms exist in volatile Industries, so it’s hard to give either the nudge in that regard. However, Elon Musk is focused on artificial intelligence, and Tesla seems unlikely to pay him what he wants. That opens the door for further trouble at Tesla and gives TSM another chance to slip into the Magnificent 7.
Visa (V)
Visa (NYSE:V) is an obvious choice to supplant Tesla among the Magnificent 7 stocks. Credit card spending continues to rise, ballooning collective credit card debt. That debt approached $1.13 trillion overall at the end of 2023.
It makes sense then that Visa Is entering fertile territory moving forward. Visa is already operating exceptionally well. Income and earnings grew nearly 20% during the most recent period. Consumers are addicted to credit and that’s unlikely to change. That has been one of the greatest lessons from the current inflationary period: cash-strapped consumers may feel the pain, but that doesn’t stop them from using credit. Further, more affluent consumers continue to travel abroad at High rates. That has resulted in higher cross-border volumes overall.
The overall thrust of that narrative is that Visa perhaps deserves Tesla’s spot. If electric vehicles face a prolonged downturn, then a leading consumer stock makes every bit of sense as a replacement. American consumerism is the most important piece of the economy overall. Why isn’t Visa deserving of a spot amongst the Magnificent 7?
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
