The “Magnificent 7” refers to a select group of seven leading U.S. tech companies that have dominated the stock market in recent years, particularly following the rise of artificial intelligence (AI). This prestigious group includes Alphabet (GOOGL), Apple (AAPL), Meta Platforms (META), Tesla (TSLA), Amazon (AMZN), Microsoft (MSFT), and Nvidia (NVDA). Most of these tech giants delivered exceptional earnings last year, driving their stock performance. Here’s a look at how these seven companies have performed over the past year, compared to the S&P 500 Index ($SPX), which gained 24%:
- Tesla stock gained 62.5%.
- Meta stock gained 69%.
- Google stock gained 37%.
- Amazon stock gained 46.3%.
- Nvidia stock gained 178.8%.
- Apple stock gained 34.9%.
- Microsoft gained 13.6%.
Let’s find out if Meta Platforms and Amazon can still soar this year.
Magnificent 7 Stock #1: Meta Platforms
Meta Platforms, formerly known as Facebook, manages some of the world’s most popular social media platforms, including Instagram, WhatsApp, and Messenger. The company is experiencing remarkable growth across its social media networks. Additionally, its bold foray into the metaverse, along with ongoing advancements in AI, has introduced both challenges and opportunities to its growth story.
Meta stock even outperformed the tech-heavy Nasdaq Composite Index’s ($NASX) gain of 30.7% last year.
Meta generates the majority of its revenue from digital advertising. The company’s social media platforms boast billions of active users, offering unparalleled reach for advertisers. CEO Mark Zuckerberg highlighted in the third-quarter earnings call that close to 3.2 billion people use at least one of Meta’s social media apps daily. In the third quarter, advertising contributed over 98% of Meta's total revenue, driven by growth in its Family of Apps segment. To boost advertising revenue, Meta has integrated AI-powered content discovery, shopping features, and Reels (short-form video content) into its platforms. These additions have increased user engagement and enhanced ad targeting, leading to higher advertising revenue. Overall, total revenue grew by 18.8% to $40.6 billion, while diluted earnings surged 37% to $6.03 per share.
Meta’s Reality Labs segment, which focuses on virtual reality (VR) and augmented reality (AR) projects, has been a key area of investment. The company is also integrating AI into its metaverse efforts. While these significant investments are putting pressure on margins in the short term, Zuckerberg remains confident they will deliver long-term benefits. The segment is gradually gaining momentum, with a 28.5% increase in revenue during the quarter. However, Meta anticipates continued operating losses for Reality Labs through 2025 due to ongoing investments in product development.
Last year, Reuters reported that Meta intends to make an initial investment of $10 billion to establish its largest AI data center in Louisiana, designed to handle the substantial demands of AI workloads. Meta’s financial position, with $15.5 billion in free cash flow, enabled the company to distribute $1.26 billion in dividends during the quarter. It closed the quarter with $70.9 billion in cash, cash equivalents, and marketable securities while reducing its long-term debt to $28.8 billion after repaying $10.5 billion in the quarter.
The company is set to announce its fourth-quarter earnings on Jan. 29, with management forecasting revenue between $45 billion and $48 billion, compared to $40 billion in the same quarter last year. Analysts estimate revenue at $46.9 billion and earnings of $6.74 per share. For the full year, analysts predict revenue growth of 20.8% to $162.9 billion, accompanied by a 52.5% increase in earnings. In 2025, revenue and earnings are projected to grow further by 14.5% and 12%, respectively.
Is META Stock a Buy Now?
Meta is widely regarded as a “Strong Buy” on Wall Street. Among the 51 analysts covering the stock, 43 rate it as a “Strong Buy,” two as a “Moderate Buy,” four as a “Hold,” and two as a “Strong Sell.” The average price target of $670.02 indicates 8.5% upside from current levels, while the highest estimate of $811 suggests a potential 31.4% rally this year.
With a forward price-earnings ratio of 23x based on its 2025 earnings estimate, Meta remains an attractive buy, offering promising long-term growth opportunities in the metaverse and AI.
Magnificent 7 Stock #2: Amazon
With a market capitalization of $2.4 trillion, Amazon has transformed far beyond being just an e-commerce platform. The company has evolved into a tech giant, actively involved in cloud computing, AI projects, and digital streaming. Notably, Amazon dominates the cloud computing market with a 31% share. Its cloud computing division, Amazon Web Services (AWS), now generates more profit than its retail operations, which were once the company’s primary focus.
In addition, Amazon is broadening its reach into healthcare, logistics, and nuclear power. Last year, the company signed three new strategic deals to advance the development of nuclear energy projects. Amazon has consistently demonstrated strong financial performance, with steady revenue growth fueled by its e-commerce operations and AWS. In the most recent third quarter, AWS contributed $27.5 billion, driving an 11% increase in total net sales to $158.9 billion. Adjusted earnings per share rose 52.1% year-over-year to $1.43.
Amazon’s e-commerce business continues to grow, led by the subscription-based Amazon Prime model. Prime offers its members free shipping, early or same-day delivery, video streaming, and other exclusive deals, allowing the company to build a loyal customer base. Amazon’s advertising business has also grown rapidly, leveraging its extensive user data to deliver targeted ads. In Q3, advertising generated $14.3 billion in revenue.
Despite significant capital investments in logistics and data centers, Amazon continues to generate strong cash flow, totaling $47.7 billion over the trailing 12 months ending Sept. 30. Its balance sheet reflects $71.7 billion in cash, cash equivalents, and restricted cash. With a low debt-to-equity ratio of 0.21x, Amazon is well-positioned to fund further business expansion. For the fourth quarter, the company projects revenue growth of 7% to 11% year-over-year, reaching between $181.5 billion and $188.5 billion, while the consensus estimate is $187.2 billion.
For the full year, analysts anticipate Amazon’s revenue and earnings to grow by 10.9% and 77.1%, respectively, with earnings projected to rise an additional 20.3% in 2025. Despite this growth, Amazon stock may be considered overvalued, trading at 36 times its estimated 2025 earnings. The company’s leadership in e-commerce, strong position in cloud computing, and ventures into new markets could support sustained long-term growth. However, investors should weigh its future growth potential against near-term risks to decide if Amazon stock fits into their investment strategy.
Is AMZN Stock a Buy Now?
On Wall Street, AMZN stock is rated a “Strong Buy.” Of the 49 analysts covering the stock, 45 have given it a “Strong Buy” rating, three recommend a “Moderate Buy,” and one has a “Hold” rating. The average target price is $249.65, indicating potential upside of 11.7% from its current price. Additionally, the highest target price of $290 suggests the stock could rise by as much as 29.8% over the next 12 months.
