The term “Magnificent Seven” originated from the 1960 Western film of the same name. In the finance sector, the term is coined for seven of the most influential tech stocks in the world.
Today, the term ‘Magnificent 7’ is reserved for the seven highest-flying tech stocks dominating the market. Most indices move in line with these major names, as they make up more than a quarter of the valuation of many top indices. Thus, these are clearly the most-watched stocks for most investors, particularly those with passive index funds.
The question for stock pickers is which of these seven giants are worth buying. Here’s my top three picks.
Apple (AAPL)
Apple (NASDAQ:AAPL) is a company that’s thrived across numerous market conditions. While some believe the company’s consumer discretionary business model may have a difficult time if a recession is on the horizon, others preach patience. Analysts at Evercore ISI are among those who are advising a patient long-term approach, with iPhone growth likely to drive near-term upside, and the highly-profitable services segment set to take over in the long-term.
The iPhone revolutionized the tech sector, merging many devices into one. Accordingly, Apple soared to global dominance. Even now, the iPhone drives 58% of the company’s overall revenue, and remains a core focal point of investors. However, services like iCloud and Apple Music are gaining in importance, contributing 19% to sales.
Despite a lackluster recent quarter, the Vision Pro shows promise in Apple’s revenue stream. While not expected to outpace iPhone sales soon, improvements could elevate it beyond niche status, potentially impacting share price. Software upgrades may enhance its appeal in 2024.
After Apple’s latest results, CEO Tim Cook hinted at upcoming generative AI products, reflecting the company’s significant investment in AI integration. While specifics are lacking, analysts anticipate important AI-driven updates, potentially increasing the stock price.
Amazon (AMZN)
AI stands as a transformative technology of our era. Large language models with vast parameters usher in new generative AI applications, enhancing customer experiences and productivity. Amazon (NASDAQ:AMZN) prioritizes responsible AI use, collaborating with stakeholders for safety and fairness. With the company now advocating for effective regulatory frameworks promoting innovation, I think Amazon could be a leader in this space (though one that’s relatively overlooked).
Amazon recently joined the U.S. Artificial Intelligence Safety Institute Consortium led by NIST, fostering collaboration between government and industry for safe AI advancement. Collaborating with NIST, Amazon aims to establish measurement standards for trustworthy AI development.
Owning AMZN stock provides investors with exposure to two major global growth sectors: e-commerce and cloud services. The company’s retail segment recently set a holiday sales record, with ongoing improvements and rising Prime membership fees promising continued growth. CEO Andy Jassy highlighted the company’s focus on customer experience enhancements, particularly evident in the rapidly expanding cloud services division.
Expectations for double-digit growth continue, driven by sustained innovation and increased adoption of cloud services. Over time, I think Amazon will continue to outperform, and its high-margin cloud and advertising businesses will get more love from investors.
Meta Platforms (META)
Facebook’s parent company Meta Platforms (NASDAQ:META) is a Magnificent 7 stock every investor should own. Surging more than 150% in 2023, the company has shown robust revenue and consistent profit growth. Meta’s recent earnings report also shows how impactful the stock is, given the fact META stock rose 20% post-release. Despite this reality, I still think META stock remains attractively-priced, making it a compelling investment opportunity.
The company reported Q4 revenue of $40.1 billion, up 25% from the previous year. Via trimming costs by 8%, the company was able to triple its adjusted earnings to $5.33 per share. These figures surpassed consensus estimates. The company’s Q4 revenue also outperformed expectations, with a 16% increase. The full year showcased 73% increases and $14.87 per share due to improved operational efficiency and cost management.
In 2024, digital ad expenses is also expected to reach 13.2%. Meta’s advancement in the digital ad realm is attributed to AI integration. Leveraging AI across its ad systems, Meta has enhanced its monetization efficiency. Features like Advantage+ and generative AI tools aid advertisers, driving traction and promising early performance gains. The consensus analyst forecast suggests a 27% annual growth in AI adoption in digital marketing, with projected revenue reaching $79 billion in 2030.
On the date of publication, Chris MacDonald 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.
