Since the beginning of last year, the group of stocks collectively referred to as the "Magnificent Seven" has helped push the market higher. The combination of industry-leading positions and connections to artificial intelligence (AI) has made this group of high-profile stocks a must-have for many investors. However, since the beginning of 2024, there's been a divergence, and while some members continue to pull their weight, others have fallen short.
With that as a backdrop, social media maven Meta Platforms (META -2.59%) climbed 3.1%, e-commerce and cloud pioneer Amazon (AMZN 0.47%) rose 3.1%, and electric vehicle (EV) specialist Tesla (TSLA 16.35%) tumbled 1.9%, as of 1:45 p.m. ET.
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Business-based drivers
Meta Platforms investors were optimistic today after the social media company responded to allegations by the U.S. Federal Trade Commission (FTC) that it violated a 2020 privacy agreement. The settlement banned the company from profiting from data related to minors.
The FTC sought to amend the accord, but Meta pushed back, saying it "voluntarily disclosed the technical errors" detected in its Messenger Kids app. The FTC is looking to impose additional restrictions on Meta, which could ultimately be more costly. Investors welcomed the company's response to regulators.
Meanwhile, a couple of things appear to be moving Amazon stock. Reports have emerged that the company is cutting a number of jobs in its Amazon Web Services (AWS) cloud computing segment as it seeks to rein in costs. The company is reportedly eliminating hundreds of positions, including those in marketing, sales, and global services.
Furthermore, in an overhaul of its Amazon Fresh stores, the company announced it is eliminating its "Just Walk Out" technology from stores in the U.S., replacing the costly systems with smart shopping carts. This move will also likely save Amazon money over the long term, and investors applauded the cost-saving measures.
There are also a couple of reports that are driving Tesla. Unfortunately for investors, the stock is headed in the other direction. In the wake of what some market watchers called a "nightmare quarter" for Tesla, there are reports the company is slashing prices on the Model Y -- its most popular vehicle -- by as much as $7,000 in the U.S.
The move is designed to clear out the company's massive backlog of inventory, as Tesla reported manufacturing 46,000 more vehicles than it delivered in the first quarter. This will likely have a negative impact on Tesla's bottom line for the current quarter.
Additionally, according to a report by Reuters, Tesla has decided to scrap plans to build a lower-priced model. The project has been on the drawing board for years, and a less-costly model was seen as a way to appeal to a broader cross-section of the car market. If Tesla were to abandon this long-term goal, this could impact how investors view the company's future prospects.
It's worth noting that CEO Elon Musk reportedly refuted the claims on social media.
A parting of the ways?
It seemed the Magnificent Seven could do no wrong last year, with the group often moving higher in unison. Eventually, however, investors will demand performance from even the most viral businesses, and that appears to be happening thus far in 2024. Meta and Amazon, along with Nvidia, Microsoft, and Alphabet, are all outpacing the S&P 500 this year, while Tesla and Apple -- which have both faced headwinds -- are lagging the broader market.
From a valuation standpoint, Meta is the cheapest of our trio of stocks, selling for just 26 times forward earnings, compared to multiples of 44 and 59 for Amazon and Tesla, respectively.
To be clear, each of the Magnificent Seven stocks has the potential to lead the market higher again, but investors will require strong business and financial performance before fueling further gains.
