Are you worried that the "Magnificent Seven" stocks are running out of steam? In the past month, many of these fast-growing stocks have still been rising in value but at rates below 10%.
While these businesses may still be magnificent, their high valuations could be keeping some investors at bay. There could still be buying opportunities within the Magnificent Seven, according to analysts; it just may not be where you expect.
Analyst projections for the Magnificent Seven
Here's a breakdown of the consensus analyst price target for each of the Magnificent Seven, and what their approximate upside would be, based on their closing prices from last week.
| Stock | Price Target | Upside % |
|---|---|---|
| AAPL | $205.27 | 19% |
| AMZN | $197.95 | 13% |
| GOOG | $146.33 | 3% |
| MSFT | $415.00 | 0% |
| META | $494.53 | 2% |
| NVDA | $829.66 | (6%) |
| TSLA | $211.93 | 30% |
Source: MarketBeat. Upside based on closing prices from March 15, 2024.
Price targets are set for how analysts expect a stock will perform, typically over the next 12 months. That doesn't mean a stock like Nvidia, which has amassed incredible 80% gains this year, is suddenly going to fall in value. Price targets get updated over time, and the simple reason for Nvidia's low price target and negative upside is likely due to how fast the tech stock has grown. Given how much growth may be in the company's long-term future, it could still be a good buy.
In the case of Tesla (TSLA -1.11%), its attractive upside potential may have more to do with the stock's decline. This year, shares of the electric vehicle (EV) maker have fallen by 30%.
Declining margins, an increase in competition, and concerns about economic conditions and potentially sluggish demand for EVs are negative headwinds that have been weighing on the stock this year. If analysts haven't updated their price targets to adequately account for those factors, that could explain why the upside is as high as it is.
Is Tesla the best deal in the Magnificent Seven?
Based on the price targets today, you may be inclined to think that Tesla is the best stock to buy right now. The problem is that when you factor in its expected earnings numbers, the picture looks much different, and it's Tesla that looks to be the most expensive stock.
Forward PE Ratios data by YCharts
When it comes to forward price-to-earnings multiples, investors are again relying on analyst expectations of earnings for the coming year.
However, the multiple helps to highlight the problem with Tesla's stock: Investors are continuing to pay a hefty premium for it. Nvidia, for all its impressive returns, is interestingly enough in the middle of the pack, given its strong profits and expected near-term growth.
Tesla may look cheap, but it isn't the best buy in the Magnificent Seven
Tesla could recover in the long run, but it may be the riskiest stock to own in the Magnificent Seven right now. Any of the other stocks in that list may potentially be better and safer buys in the long run.
Investors should be careful not to rely on analyst price targets too heavily as they can sometimes become outdated, and a stock that has been falling rapidly may look as though it has a lot of upside, as is the case with Tesla.
Investors should focus on the long term. Whether it's Nvidia for its coveted artificial intelligence chips or Amazon for its continued growth in e-commerce, there are plenty of more appealing options than Tesla right now.
