Magnificent 7 stocks scorecard for 2024: the good, bad and ugly

The Magnificent 7 stocks have done well in the first half of the year as they continued to outperform the broad market. The closely-watched Roundhill Magnificent 7 ETF (MAGS) has risen by 43% this year, higher than the Invesco QQQ (20.3%) and the SPY S&P 500 (SPY), which has risen by over 16.4%. 

Magnificent 7 stocks

Nvidia stock has led the way

Most of the Magnificent 7 gains are because of Nvidia, the semiconductor company that has jumped by almost 160% this year. 

Nvidia has benefited from the ongoing demand of artificial intelligence chips. Its Q1 results showed that its revenue rose by over 200% as companies like Amazon, Google, and Microsoft continued investing in their data center.

Nvidia operates the most powerful GPU chip and the most powerful software known as Cuda. This software enables chips originally designed for graphics to speed up AI applications. 

The biggest challenge for the Nvidia stock is that it has become highly expensive and could retreat if the company’s growth slows.

Meta Platforms stock has done well

As I wrote earlier, Meta Platforms stock price has surged by over 44% this year, continuing the gains that started in late 2022. The company has benefited from the continued advertising spending and its crucial market share in the sector. 

It is a cash printer with one of the best balance sheets in the industry and has now started to pay a dividend. It ended the last quarter with over $58 billion in cash and short-term investments and has minimal debt. 

The key concern for Meta Platforms is that its social media platforms are not seeing the strong growth that they did before. Most people are no longer posting and it is facing robust competition from the likes of TikTok.

Alphabet stock rose by 32%

I believe that Alphabet is the best Magnificent 7 company. It is a market leader in search engine and YouTube has become the biggest streaming company in the world.

Most importantly, Alphabet will ultimately become the biggest player in the AI space, thanks to its Gemini product. It also owns Android, the biggest smartphone operating system in the world.

Alphabet is also the third-biggest player in the cloud computing industry after Amazon and Microsoft. It will likely continue to benefit from the growth of online advertising, AI, and cloud computing in the long run. 

Alphabet’s financial results showed that its revenue jumped from $69 billion in Q1’23 to over $80 billion in Q1’24. It is also a highly profitable company with Q1’s net profit of over $23.6 billion, a solid balance sheet, minimal debt, and has started to pay dividends. Alphabet is also a fairly valued company with a P/E ratio of less than 25.

Amazon stock is rising

The third-best performer in the Magnificent 7 was Amazon, whose stock jumped by over 30% in the first half of the year. 

Amazon is benefiting from the artificial intelligence hype, where it is one of the biggest player through its numerous investments like Anthropic. It is also benefiting from the continued growth of its cloud computing business. 

Amazon’s quarterly results showed that its revenue rose from $127 billion in 2023 to over $143 billion. It has also become a highly profitable company with its net profit soaring from over $3.1 billion in Q1’23 to over $10.4 billion. 

Like other Magnificent 7 companies, Amazon is a highly overvalued company with a market cap of over $2 trillion and a forward PE ratio of 43.4. It will need to demonstrate more growth to justify this valuation.

Microsoft is benefiting from AI

Microsoft stock price jumped by 22% in the first half of the year. Like Alphabet, I believe that Microsoft is another good Magnificent 7 company because of its dominant role in key businesses.

Microsoft’s Azure product is the second-biggest player in cloud computing after Amazon. It is also a big investor in OpenAI, the parent company of ChatGPT. 

Microsoft’s revenue rose from $52.8 billion in the first quarter to over $61.8 billion while its net income jumped to $21.9 billion.

The company is in a dominant position in key industries, has strong margins, and has more room to continue growing its business. However, there are also concerns about its valuation as it trades at a forward P/E ratio of 39. 

Apple has major concerns

Apple stock jumped by 15% in the first half, making it the second-worst performer in the Magnificent 7. 

As things stand, Apple is one of the weakest companies in the group. Its iPhone sales are falling since most people stay longer with iPhones than they did in the past. The iPhone generated $69.7 billion in revenues in the first quarter. Apple Vision Pro’s sales have not been all that strong.

Further, the iPad’s business will continue falling as demand for the product slows. Unlike in the past, people are no longer buying iPad as they did before. Also, while the product was recently upgraded, most people have no major incentive to upgrade to a new one.

Apple’s service business, which has become a core part of its operations is also seeing headwinds as growth slows. Therefore, Apple has a lot of work to do to justify its $3 trillion valuation.

Tesla stock challenges

Tesla stock price has dropped by 1% this year, making it the worst-performing player in the Magnificent 7. Fortunately, the stock has rebounded in the past few weeks, rising by over 50% from its lowest point this year. 

Tesla stock has some of the weakest fundamentals in the Magnificent 7. It is facing substantial competition, margins are falling, the number of vehicles sold is falling, and its revenue growth is moving in the wrong direction.

Its quarterly revenue dropped from over $23 billion in Q1’23 to over $21 billion in the last quarter. This trend will likely continue in the near term. Also, Tesla is one of the most overvalued companies in the industry.