Current Standings of the Elite Stocks
When surveying the current market landscape, it’s evident that the ‘Magnificent 7’ stocks, excluding Tesla (TSLA), are scaling record peaks. Characterizing any of these top-tier stocks as “cheap” may appear oxymoronic. The elite constituents, being stalwarts in their own right, seldom present themselves at tantalizing discounts. However, history tells a different tale. Moments of market distress, most recently experienced in 2022, have provided opportunistic investors a chance to acquire these gems at bargain prices. Warren Buffett’s timeless adage to “buy the fear” has consistently proven its mettle, even as the Oracle of Omaha cautiously navigates the tech realm, deeming it beyond his purview.
Nvidia’s Stellar Performance in 2024
Among the ‘Magnificent 7’ stocks, Nvidia (NVDA) shines bright in 2024 with an impressive Year-to-Date surge of 142%. Following in a distant echelon are Meta Platforms (META) and Alphabet (GOOG), boasting 37.7% and 24.7% gains, respectively. Amazon (AMZN) and Microsoft (MSFT) trail with 19.3% and 12.3% upticks. Apple (AAPL) treads water, while Tesla lags as the weakest performer, grappling with a YTD loss of 29.3%.
Delving into Price-to-Earnings (PE) Multiples
Price-to-earnings (PE) multiples serve as a lodestar in the valuation cosmos. Alphabet flaunts the lowest forward PE multiple at 22.56x, closely followed by Meta Platforms at 22.13x. Apple secures the third spot with a forward PE multiple of 29.1x, trailed by Microsoft at 35.23x. Amazon and Nvidia clock in at 38x and 47x, respectively. Tesla finds itself perched atop the list with the highest forward PE multiple of 95x, its profits destabilized by self-induced price wars and a meager 5.5% operating profit margin in Q1.
Insights into Magnificent 7 Stock Valuations
Glancing beyond PE multiples, the price/earnings-to-growth (PEG) multiple merits special attention. Meta parades the lowest PEG multiple at 1.21x, flanked closely by Nvidia and Amazon at 1.28x each. Alphabet tails at a near 1.29x mark. On the other end of the spectrum, Microsoft and Apple notch 2.19x and 2.33x in PEG multiples, while Tesla lodges the climax at 4.39x.
Unveiling the Most Economical Choice Among the Elite
The ‘Magnificent 7’, despite their shared moniker, harbor distinctive dynamics shaping their valuation edifice. Unified in their AI pursuits, albeit to divergent extents, each stock boasts its unique narrative. Among them, Amazon emerges as a beacon of affordability in the Big Tech constellation. Fused with a diversified portfolio spanning ecommerce, cloud services, digital advertising, streaming, and AI, Amazon carves a nuanced niche.
Perceived Value in Amazon’s Stock
Amazon’s ascendancy in e-commerce and enterprise-focused services, notably Amazon Web Services (AWS), epitomizes stability post-troughs. Anchored by burgeoning segments like Amazon Business, pharmacy services, and a burgeoning ad ecosystem, the tech titan revels in a phase of metamorphosis catalyzed by Generative AI pursuits. Bolstered by robust earnings, Amazon’s trailing 12-month free cash flows, excluding equipment lease finance, surpassed $48.8 billion by Q1 closure, painting a portrait of financial fortitude.
The narrative extends further—while Amazon’s PE multiple may seem lofty vis-à-vis its peers, the stock projects the second lowest price-to-free cash flow multiple, nudging ahead of Meta. In the grand scheme of Big Tech incumbents, Nvidia may command the limelight, yet Amazon emerges as a compelling value proposition for discerning investors scouting for potent value amidst market vicissitudes.